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~~June 30, ~~2022~~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 for 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~~507,634,731 shares were outstanding as of ~~November~~August 7, ~~2022.~~2023.

TABLE OF CONTENTS


		Page Number
PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Financial Condition as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022	2
	Consolidated Statements of Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	3
	Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	54
	Consolidated Statements of Changes in Shareholders' Equity for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	65
	Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	87
	Notes to Consolidated Financial Statements	109

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8986

Item 4.	Controls and Procedures	8986

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	9087

Item 1A.	Risk Factors	9087

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9088

Item 5.	Other ~~Items~~Information	9088

Item 6.	Exhibits	9189

SIGNATURES		9189

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


	June 30, 2023		December 31, 2022
Assets	(Unaudited)
Cash and due from banks	$	463,318	$	444,325
Interest bearing deposits with banks	1,491,091		503,622
Investment securities:
Equity securities	61,010		48,731
Trading debt securities	3,409		13,438
Available for sale debt securities	1,236,946		1,261,397
Held to maturity debt securities (net of allowance for credit losses of $1,351 at June 30, 2023 and $1,646 at December 31, 2022)	3,765,487		3,827,338
Total investment securities	5,066,852		5,150,904
Loans held for sale, at fair value	33,044		18,118
Loans	49,877,248		46,917,200
Less: Allowance for loan losses	(436,432)		(458,655)
Net loans	49,440,816		46,458,545
Premises and equipment, net	386,584		358,556
Lease right of use assets	359,751		306,352
Bank owned life insurance	717,681		717,177
Accrued interest receivable	225,918		196,606
Goodwill	1,868,936		1,868,936
Other intangible assets, net	177,946		197,456
Other assets	1,471,756		1,242,152
Total Assets	$	61,703,693	$	57,462,749
Liabilities
Deposits:
Non-interest bearing	$	12,434,307	$	14,463,645
Interest bearing:
Savings, NOW and money market	22,277,326		23,616,812
Time	14,908,182		9,556,457
Total deposits	49,619,815		47,636,914
Short-term borrowings	1,088,899		138,729
Long-term borrowings	2,443,533		1,543,058
Junior subordinated debentures issued to capital trusts	56,934		56,760
Lease liabilities	420,972		358,884
Accrued expenses and other liabilities	1,498,356		1,327,602
Total Liabilities	55,128,509		51,061,947
Shareholders’ Equity
Preferred stock, no par value; 50,000,000 authorized shares:
Series A (4,600,000 shares issued at June 30, 2023 and December 31, 2022)	111,590		111,590
Series B (4,000,000 shares issued at June 30, 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 June 30, 2023 and December 31, 2022)	178,187		178,185
Surplus	4,974,507		4,980,231
Retained earnings	1,379,534		1,218,445
Accumulated other comprehensive loss	(164,747)		(164,002)
Treasury stock, at cost (277,480 common shares at June 30, 2023 and 1,522,432 common shares at December 31, 2022)	(1,988)		(21,748)
Total Shareholders’ Equity	6,575,184		6,400,802
Total Liabilities and Shareholders’ Equity	$	61,703,693	$	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 June 30,				Six Months Ended June 30,
											2023		2022		2023		2022
Interest Income										Interest Income
Interest and fees on loans										Interest and fees on loans	$	715,172	$	415,577	$	1,370,398	$	732,942
Interest and dividends on investment securities:										Interest and dividends on investment securities:
Taxable										Taxable	31,919		27,534		64,208		45,973
Tax-exempt										Tax-exempt	5,575		5,191		10,900		7,708
Dividends										Dividends	7,517		3,076		12,702		4,752
Interest on federal funds sold and other short-term investments										Interest on federal funds sold and other short-term investments	27,276		1,569		49,481		2,030

Total interest income										Total interest income	787,459		452,947		1,507,689		793,405
Interest Expense										Interest Expense
Interest on deposits:										Interest on deposits:
Savings, NOW and money market										Savings, NOW and money market	164,842		17,122		315,608		26,749
Time										Time	125,764		3,269		206,062		6,100
Interest on short-term borrowings										Interest on short-term borrowings	50,208		4,083		84,156		4,889
Interest on long-term borrowings and junior subordinated debentures										Interest on long-term borrowings and junior subordinated debentures	26,880		10,313		46,078		19,838
Total interest expense										Total interest expense	367,694		34,787		651,904		57,576
Net Interest Income										Net Interest Income	419,765		418,160		855,785		735,829

(Credit) provision for credit losses for available for sale and held to maturity securities										(Credit) provision for credit losses for available for sale and held to maturity securities	(282)		286		4,705		343
Provision for credit losses for loans										Provision for credit losses for loans	6,332		43,712		15,782		47,212
Net Interest Income After Provision for Credit Losses										Net Interest Income After Provision for Credit Losses	413,715		374,162		835,298		688,274
Non-Interest Income										Non-Interest Income
Wealth management and trust fees										Wealth management and trust fees	11,176		9,577		20,763		14,708
Insurance commissions										Insurance commissions	3,139		3,463		5,559		5,322
Capital markets										Capital markets	16,967		14,711		27,859		29,071
Service charges on deposit accounts										Service charges on deposit accounts	10,542		10,067		21,018		16,279
Gains (losses) on securities transactions, net										Gains (losses) on securities transactions, net	217		(309)		595		(1,381)

Fees from loan servicing										Fees from loan servicing	2,702		2,717		5,373		5,498
Gains on sales of loans, net										Gains on sales of loans, net	1,240		3,602		1,729		4,588

Bank owned life insurance										Bank owned life insurance	2,443		2,113		5,027		4,159
Other										Other	11,649		12,592		26,451		19,559
Total non-interest income										Total non-interest income	60,075		58,533		114,374		97,803
Non-Interest Expense										Non-Interest Expense
Salary and employee benefits expense										Salary and employee benefits expense	149,594		154,798		294,580		262,531
Net occupancy expense										Net occupancy expense	25,949		22,429		49,205		44,420
Technology, furniture and equipment expense										Technology, furniture and equipment expense	32,476		49,866		68,984		75,880
FDIC insurance assessment										FDIC insurance assessment	10,426		5,351		19,581		9,509
Amortization of other intangible assets										Amortization of other intangible assets	9,812		11,400		20,331		15,837
Professional and legal fees										Professional and legal fees	21,406		30,409		38,220		45,158

Amortization of tax credit investments										Amortization of tax credit investments	5,018		3,193		9,271		6,089
Other										Other	28,290		22,284		54,965		37,646
Total non-interest expense										Total non-interest expense	282,971		299,730		555,137		497,070
Income Before Income Taxes										Income Before Income Taxes	190,819		132,965		394,535		289,007
Income tax expense										Income tax expense	51,759		36,552		108,924		75,866
Net Income										Net Income	139,060		96,413		285,611		213,141
Dividends on preferred stock										Dividends on preferred stock	4,030		3,172		7,904		6,344
Net Income Available to Common Shareholders										Net Income Available to Common Shareholders	$	135,030	$	93,241	$	277,707	$	206,797

		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	$	0.27	$	0.18	$	0.55	$	0.45
Diluted	Diluted	0.34		0.29		0.79		0.86		Diluted	0.27		0.18		0.55		0.44
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 June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net income	Net income	$	178,119	$	122,580	$	391,260	$	358,802	Net income	$	139,060	$	96,413	$	285,611	$	213,141
Other comprehensive loss, net of tax:	Other comprehensive loss, net of tax:									Other comprehensive 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	Net losses arising during the period	(57,242)		(3,953)		(148,403)		(15,860)		Net losses arising during the period	(18,051)		(52,269)		(881)		(91,161)
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	(18,051)		(52,269)		(881)		(91,171)

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	Net (losses) gains on derivatives arising during the period	(85)		(96)		110		(69)		Net (losses) gains on derivatives arising during the period	(3,573)		(23)		(775)		195
Less reclassification adjustment for net (gains) losses included in net income		(13)		743		293		1,928
Less reclassification adjustment for net losses (gains) included in net income										Less reclassification adjustment for net losses (gains) included in net income	516		(80)		895		306
Total	Total	(98)		647		403		1,859		Total	(3,057)		(103)		120		501
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		133		16		265

Total other comprehensive loss	Total other comprehensive loss	(57,220)		(3,640)		(147,625)		(13,657)		Total other comprehensive loss	(21,100)		(52,239)		(745)		(90,405)
Total comprehensive income	Total comprehensive income	$	120,899	$	118,940	$	243,635	$	345,145	Total comprehensive income	$	117,960	$	44,174	$	284,866	$	122,736

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~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	—		—	—		—		146,551		—		—		146,551
Other comprehensive income, net of tax																	Other comprehensive income, net of tax	—		—	—		—		—		20,355		—		20,355
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 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	—		—	—		—		(56,488)		—		—		(56,488)
Effect of stock incentive plan, net																	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

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
Net income	Net income	—		—	—		—		116,728		—		—		116,728		Net income	—		—	—		—		139,060		—		—		139,060
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—		—	—		—		—		(38,166)		—		(38,166)		Other comprehensive loss, net of tax	—		—	—		—		—		(21,100)		—		(21,100)
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, $0.56 per share																	Preferred stock, Series B, $0.56 per share	—		—	—		—		(2,233)		—		—		(2,233)
Common stock, $0.11 per share	Common stock, $0.11 per share	—		—	—		—		(46,803)		—		—		(46,803)		Common stock, $0.11 per share	—		—	—		—		(56,474)		—		—		(56,474)
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	—		157	1		6,845		(2)		—		1,395		8,239

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
Common stock repurchased																	Common stock repurchased	—		(300)	—		—		—		—		(2,092)		(2,092)
Balance - June 30, 2023																	Balance - June 30, 2023	$	209,691	507,619	$	178,187	$	4,974,507	$	1,379,534	$	(164,747)	$	(1,988)	$	6,575,184

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

For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~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)
Common stock repurchased																	Common stock repurchased	—		(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
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
Net income	Net income	—		—	—		—		120,512		—		—		120,512		Net income	—		—	—		—		96,413		—		—		96,413
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—		—	—		—		—		(730)		—		(730)		Other comprehensive loss, net of tax	—		—	—		—		—		(52,239)		—		(52,239)
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	—		—	—		—		(45,093)		—		—		(45,093)		Common stock, $0.11 per share	—		—	—		—		(56,211)		—		—		(56,211)
Effect of stock incentive plan, net	Effect of stock incentive plan, net	—		286	115		6,688		(130)		—		(53)		6,620		Effect of stock incentive plan, net	—		72	1		5,125		(109)		—		892		5,909
Common stock issued																	Common stock issued	—		84,863	29,702		1,088,127		—		—		—		1,117,829
Balance - June 30, 2022																	Balance - June 30, 2022	$	209,691	506,329	$	178,185	$	4,965,488	$	982,146	$	(108,337)	$	(22,260)	$	6,204,913

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)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	391,260	$	358,802	Net income	$	285,611	$	213,141
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	52,545		40,799		Depreciation and amortization	21,425		18,297
Stock-based compensation	Stock-based compensation	20,978		15,852		Stock-based compensation	16,773		13,420
Provision for credit losses	Provision for credit losses	49,578		20,934		Provision for credit losses	20,487		47,555
Net amortization of premiums and accretion of discounts on securities and borrowings	Net amortization of premiums and accretion of discounts on securities and borrowings	10,603		22,145		Net amortization of premiums and accretion of discounts on securities and borrowings	(639)		9,680
Amortization of other intangible assets	Amortization of other intangible assets	26,925		16,753		Amortization of other intangible assets	20,331		15,837
Losses (gains) on securities transactions, net		1,058		(1,263)
Losses (gains) on available for sale and held to maturity debt securities, net						Losses (gains) on available for sale and held to maturity debt securities, net	33		(69)
Proceeds from sales of loans held for sale	Proceeds from sales of loans held for sale	378,216		932,274		Proceeds from sales of loans held for sale	72,925		331,298
Gains on sales of loans, net	Gains on sales of loans, net	(5,510)		(20,016)		Gains on sales of loans, net	(1,729)		(4,588)
Originations of loans held for sale	Originations of loans held for sale	(244,441)		(774,443)		Originations of loans held for sale	(76,943)		(210,048)
Losses (gains) on sales of assets, net		372		(380)
Loss on extinguishment of debt		—		8,406
(Gains) losses on sales of assets, net						(Gains) losses on sales of assets, net	(286)		265

Net change in:	Net change in:					Net change in:
Fair value of borrowings hedged by derivative transactions	Fair value of borrowings hedged by derivative transactions	(30,585)		—		Fair value of borrowings hedged by derivative transactions	(291)		(20,194)
Trading debt securities	Trading debt securities	34,030		(4,797)		Trading debt securities	10,029		39,580
Lease right of use assets						Lease right of use assets	(53,412)		521
Cash surrender value of bank owned life insurance	Cash surrender value of bank owned life insurance	(5,840)		(6,824)		Cash surrender value of bank owned life insurance	(5,722)		(4,159)
Accrued interest receivable	Accrued interest receivable	(36,807)		8,157		Accrued interest receivable	(29,312)		(12,083)
Other assets	Other assets	(402,391)		97,341		Other assets	(230,017)		(191,597)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	990,607		(130,698)		Accrued expenses and other liabilities	233,419		558,675
Net cash provided by operating activities	Net cash provided by operating activities	1,230,598		583,042		Net cash provided by operating activities	282,682		805,531
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Net loan originations and purchases	Net loan originations and purchases	(5,114,908)		(405,204)		Net loan originations and purchases	(3,009,649)		(3,495,486)
Equity securities:	Equity securities:					Equity securities:
Purchases	Purchases	(4,148)		(3,163)		Purchases	(9,662)		(1,538)
Sales	Sales	1,725		1,227		Sales	771		1,110
Held to maturity debt securities:	Held to maturity debt securities:					Held to maturity debt securities:
Purchases	Purchases	(666,188)		(1,062,202)		Purchases	(114,544)		(545,934)

Maturities, calls and principal repayments	Maturities, calls and principal repayments	410,760		633,272		Maturities, calls and principal repayments	175,492		294,052
Available for sale debt securities:	Available for sale debt securities:					Available for sale debt securities:
Purchases	Purchases	(49,618)		(367,866)		Purchases	(41,470)		(38,000)
Sales	Sales	12,846		91,978		Sales	17,910		12,846
Maturities, calls and principal repayments	Maturities, calls and principal repayments	192,868		376,875		Maturities, calls and principal repayments	44,534		150,262
Death benefit proceeds from bank owned life insurance	Death benefit proceeds from bank owned life insurance	4,680		3,850		Death benefit proceeds from bank owned life insurance	5,218		3,089
Proceeds from sales of real estate property and equipment	Proceeds from sales of real estate property and equipment	7,400		4,982		Proceeds from sales of real estate property and equipment	490		7,265
Proceeds from sales of loans held for investment		—		4,498

Purchases of real estate property and equipment	Purchases of real estate property and equipment	(50,511)		(19,805)		Purchases of real estate property and equipment	(49,468)		(35,164)

Cash and cash equivalent acquired in acquisitions, net	Cash and cash equivalent acquired in acquisitions, net	321,540		—		Cash and cash equivalent acquired in acquisitions, net	—		321,540
Net cash used in investing activities	Net cash used in investing activities	(4,933,554)		(741,558)		Net cash used in investing activities	(2,980,378)		(3,325,958)


VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued) (in thousands)	VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued) (in thousands)					VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued) (in thousands)
											VALLEY NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (continued) (in thousands)
		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net change in deposits	Net change in deposits	$	2,646,434	$	1,697,003	Net change in deposits	$	1,982,901	$	1,218,642
Net change in short-term borrowings	Net change in short-term borrowings	159,763		(364,612)		Net change in short-term borrowings	950,170		763,284
Proceeds from issuance of long-term borrowings, net	Proceeds from issuance of long-term borrowings, net	147,508		295,922		Proceeds from issuance of long-term borrowings, net	1,250,000		—
Repayments of long-term borrowings	Repayments of long-term borrowings	—		(1,168,465)		Repayments of long-term borrowings	(350,000)		—
Cash dividends paid to preferred shareholders	Cash dividends paid to preferred shareholders	(9,516)		(9,516)		Cash dividends paid to preferred shareholders	(7,904)		(6,344)
Cash dividends paid to common shareholders	Cash dividends paid to common shareholders	(148,345)		(134,860)		Cash dividends paid to common shareholders	(113,611)		(92,618)
Purchase of common shares to treasury	Purchase of common shares to treasury	(24,013)		(699)		Purchase of common shares to treasury	(11,133)		(23,886)
Common stock issued, net	Common stock issued, net	106		15,199		Common stock issued, net	3,750		106
Other, net	Other, net	(553)		(505)		Other, net	(15)		(365)
Net cash provided by financing activities	Net cash provided by financing activities	2,771,384		329,467		Net cash provided by financing activities	3,704,158		1,858,819
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(931,572)		170,951		Net change in cash and cash equivalents	1,006,462		(661,608)
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	2,049,920		1,329,205		Cash and cash equivalents at beginning of year	947,947		2,049,920
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,118,348	$	1,500,156	Cash and cash equivalents at end of period	$	1,954,409	$	1,388,312

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash payments for:	Cash payments for:					Cash payments for:
Interest on deposits and borrowings	Interest on deposits and borrowings	$	129,504	$	109,661	Interest on deposits and borrowings	$	571,741	$	57,151
Federal and state income taxes	Federal and state income taxes	122,170		148,674		Federal and state income taxes	122,130		77,285
Supplemental schedule of non-cash investing activities:	Supplemental schedule of non-cash investing activities:					Supplemental schedule of non-cash investing activities:
Transfer of loans to other real estate owned	Transfer of loans to other real estate owned	$	—	$	141	Transfer of loans to other real estate owned	$	903	$	—

Transfer of loans to loans held for sale						Transfer of loans to loans held for sale	10,000		—
Lease right of use assets obtained in exchange for operating lease liabilities	Lease right of use assets obtained in exchange for operating lease liabilities	32,604		40,296		Lease right of use assets obtained in exchange for operating lease liabilities	81,727		24,745
Acquisitions:	Acquisitions:					Acquisitions:
Non-cash assets acquired:	Non-cash assets acquired:					Non-cash assets acquired:
Equity securities	Equity securities	6,239		—		Equity securities	—		6,239
Investment securities available for sale	Investment securities available for sale	505,928		—		Investment securities available for sale	—		505,928
Investment securities held to maturity	Investment securities held to maturity	806,627		—		Investment securities held to maturity	—		806,627
Loans, net	Loans, net	5,844,070		—		Loans, net	—		5,844,070
Premises and equipment, net	Premises and equipment, net	38,827		—		Premises and equipment, net	—		38,827
Lease right of use assets	Lease right of use assets	49,434		—		Lease right of use assets	—		49,434
Bank owned life insurance	Bank owned life insurance	126,861		—		Bank owned life insurance	—		126,861
Accrued interest receivable	Accrued interest receivable	25,717		—		Accrued interest receivable	—		25,717
Goodwill	Goodwill	407,522		—		Goodwill	—		407,522
Other intangible assets, net	Other intangible assets, net	159,587		—		Other intangible assets, net	—		159,587
Other assets	Other assets	158,352		—		Other assets	—		158,352
Total non-cash assets acquired	Total non-cash assets acquired	$	8,129,164	$	—	Total non-cash assets acquired	$	—	$	8,129,164
Liabilities assumed:	Liabilities assumed:					Liabilities assumed:
Deposits	Deposits	7,029,997		—		Deposits	—		7,029,997
Short-term borrowings	Short-term borrowings	103,794		—		Short-term borrowings	—		103,794
Lease liabilities	Lease liabilities	79,844		—		Lease liabilities	—		79,844
Accrued expenses and other liabilities	Accrued expenses and other liabilities	119,240		—		Accrued expenses and other liabilities	—		119,240
Total liabilities assumed	Total liabilities assumed	$	7,332,875	$	—	Total liabilities assumed	$	—	$	7,332,875
Non-cash net assets acquired	Non-cash net assets acquired	$	796,289	$	—	Non-cash net assets acquired	—		796,289
Net cash and cash equivalents acquired in acquisition	Net cash and cash equivalents acquired in acquisition	$	321,540	$	—	Net cash and cash equivalents acquired in acquisition	$	—	$	321,540
Common stock issued in acquisition	Common stock issued in acquisition	$	1,117,829	$	—	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~~June 30, ~~2022~~2023 and for all periods presented have been made. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~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~~Merger expenses, primarily consisting of salary and employee benefit expense, totaled $4.1 million for ~~under~~ the ~~acquisition method of accounting~~six months ended June 30, 2023. There were no merger expenses for the three months ended June 30, 2023. Merger expenses totaled $54.5 million and ~~accordingly the results of Bank Leumi USA's operations have been included in Valley's consolidated financial statements~~ $58.9 million for the three and ~~nine~~six months ended ~~September~~June 30, 2022, ~~from the date of the acquisition~~.respectively,

109

and largely consisted of salary and employee benefit expense, professional and legal fees and technology related costs within non-interest expense on the consolidated statements of income.

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

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

~~Fair Value Measurement of Assets Acquired and Liabilities Assumed~~

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

1110

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

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

~~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 type and loan risk rating. The estimated fair value incorporates adjustments related to market loss assumptions and prevailing market interest rates for comparable assets and other market factors such as liquidity from a market participant perspective. Management estimated the cash flows expected to be collected at the acquisition date by using valuation models that incorporated loan contractual characteristics (such as payment type, amortization type, and term to maturity) as well as estimates of key valuation assumptions (such as prepayment speeds, default rates, and loss severity rates).

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

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

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

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


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

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

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

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

~~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 229.645 shares of Valley common stock for each Westchester share they owned prior to the merger. The total consideration for the merger was $211.1 million, consisting of approximately 15.7 million shares of Valley common stock.

~~During the~~ ~~nine months ended September 30, 2022,~~ Valley revised the estimated fair values of the acquired assets as of the acquisition date of Westchester based upon additional information obtained that existed as of December 1, 2021. The adjustments related to the fair value of deferred tax assets and resulted in a ~~$5.0 million~~ ~~increase in goodwill (see Note 9 for more information). If additional information (that existed as of the acquisition date)~~

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

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

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~~six months ended ~~September~~June 30, ~~2022~~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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in thousands, except for share and per share data)
Net income available to common shareholders	$	135,030	$	93,241	$	277,707	$	206,797
Basic weighted average number of common shares outstanding	507,690,043		506,302,464		507,402,268		464,172,210
Plus: Common stock equivalents	952,982		2,176,742		1,674,035		2,148,473
Diluted weighted average number of common shares outstanding	508,643,025		508,479,206		509,076,303		466,320,683
Earnings per common share:
Basic	$	0.27	$	0.18	$	0.55	$	0.45
Diluted	0.27		0.18		0.55		0.44

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 7.2 million and~~ere immaterial~~2.2 million for the three ~~and nine~~months ended ~~September~~June 30, 2023 and 2022, respectively, and ~~2021.~~3.0 million and 1.1 million for the six months ended June 30, 2023 and 2022, respectively.

Note 4. Accumulated Other Comprehensive Loss

The following ~~table presents~~tables present the after-tax changes in the balances of each component of accumulated other comprehensive loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022:~~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 March 31, 2023	$	(110,648)	$	5,410	$	(38,409)	$	(143,647)
Other comprehensive loss before reclassification	(18,051)		(3,573)		—		(21,624)
Amounts reclassified from other comprehensive loss	—		516		8		524
Other comprehensive (loss) income, net	(18,051)		(3,057)		8		(21,100)
Balance at June 30, 2023	$	(128,699)	$	2,353	$	(38,401)	$	(164,747)

1411

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)


	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 loss before reclassification	(881)		(775)		—		(1,656)
Amounts reclassified from other comprehensive loss	—		895		16		911
Other comprehensive (loss) income, net	(881)		120		16		(745)
Balance at June 30, 2023	$	(128,699)	$	2,353	$	(38,401)	$	(164,747)

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~~six months ended ~~September~~June 30, ~~2022~~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 June 30,				Six Months Ended June 30,
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		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	Unrealized gains (losses) on derivatives (cash flow hedges) before tax	21		(1,044)		(405)		(2,708)		Interest expense	Unrealized gains (losses) on derivatives (cash flow hedges) before tax	(725)		116		(1,256)		(426)		Interest income, interest expense
Tax effect	Tax effect	(8)		301		112		780			Tax effect	209		(36)		361		120
Total net of tax	Total net of tax	13		(743)		(293)		(1,928)			Total net of tax	(516)		80		(895)		(306)
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)		(184)		(22)		(367)		*

Tax effect	Tax effect	51		109		153		326			Tax effect	3		51		6		102
Total net of tax	Total net of tax	(132)		(279)		(397)		(837)			Total net of tax	(8)		(133)		(16)		(265)
Total reclassifications, net of tax	Total reclassifications, net of tax	$	(107)	$	(409)	$	(668)	$	(2,272)		Total reclassifications, net of tax	$	(524)	$	(53)	$	(911)	$	(561)


*			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. ~~2022-03, "Fair Value Measurement of~~ 2023-02, Investments –“Equity ~~Securities subject~~Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method,” is intended to ~~Contractual Sale Restrictions” updates guidance in ASC 820, Fair Value Measurement~~improve the accounting and ~~clarifies that a contractual sale restriction should not be considered in measuring fair value. It also requires entities with~~disclosures for investments in ~~equity securities subject to contractual sale restrictions to disclose~~ certain qualitative and quantitative information about such securities including (i) the nature and remaining duration of the restriction; (ii) the circumstances that could cause a lapse in restrictions; and (iii) the fair value of the securities with contractual sale restrictions.tax credit structures. ASU No. ~~2022-03~~2023-02 allows the option to apply the proportional amortization method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met. ASU No. 2023-02 will be effective ~~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”~~Measurement” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

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

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

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

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

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

1713


				Fair Value Measurements at Reporting Date Using:							June 30, 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)	12,328		—		—		—
Trading debt securities	Trading debt securities	38,130		—		38,130		—		Trading debt securities	3,409		3,409		—		—
Available for sale debt securities:	Available for sale debt securities:									Available for sale debt securities:

U.S. Treasury securities										U.S. Treasury securities	282,398		282,398		—		—
U.S. government agency securities	U.S. government agency securities	20,925		—		20,925		—		U.S. government agency securities	24,192		—		24,192		—
Obligations of states and political subdivisions	Obligations of states and political subdivisions	79,890		—		79,890		—		Obligations of states and political subdivisions	171,043		—		171,043		—
Residential mortgage-backed securities	Residential mortgage-backed securities	904,502		—		904,502		—		Residential mortgage-backed securities	594,636		—		594,636		—

Corporate and other debt securities	Corporate and other debt securities	123,492		—		123,492		—		Corporate and other debt securities	164,677		—		164,677		—
Total available for sale debt securities	Total available for sale debt securities	1,128,809		—		1,128,809		—		Total available for sale debt securities	1,236,946		282,398		954,548		—

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)	23,044		—		23,044		—
Other assets (2)										Other assets (2)	571,620		—		571,620		—
Total assets	Total assets	$	1,520,799	$	21,284	$	1,487,955	$	—	Total assets	$	1,870,982	$	309,442	$	1,549,212	$	—
Liabilities	Liabilities									Liabilities
Other liabilities (3)		$	52,376	$	—	$	52,376	$	—
Other liabilities (2)										Other liabilities (2)	$	599,226	$	—	$	599,226	$	—
Total liabilities	Total liabilities	$	52,376	$	—	$	52,376	$	—	Total liabilities	$	599,226	$	—	$	599,226	$	—
Non-recurring fair value measurements:	Non-recurring fair value measurements:									Non-recurring fair value measurements:
Non-performing loans held for sale										Non-performing loans held for sale	$	10,000	$	—	$	10,000	$	—
Collateral dependent loans	Collateral dependent loans	$	47,871	$	—	$	—	$	47,871	Collateral dependent loans	63,972		—		—		63,972

Foreclosed assets	Foreclosed assets	2,931		—		—		2,931		Foreclosed assets	2,132		—		—		2,132
Total	Total	$	50,802	$	—	$	—	$	50,802	Total	$	76,104	$	—	$	10,000	$	66,104


			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~~$23.0 million and ~~$136.3~~$17.9 million at ~~September~~June 30, ~~2022~~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 are reported at fair value utilizing Level 1 inputs at June 30, 2023. At December 31, 2022, trading debt securities consisted of U.S. Treasury securities and municipal bonds reported at fair value utilizing Level 1 and Level 2 inputs, respectively. The prices for municipal bonds ~~are~~investments were 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~~June 30, ~~2022~~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.~~curves. 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~~June 30, ~~2022~~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~~June 30, ~~2022~~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.

Non-performing loans held for sale. Valley transferred one non-performing construction loan totaling $10.0 million, net of charge-offs, to loans held for sale at June 30, 2023. The transfer at the loan's fair value resulted in a $4.2 million charge-off to the allowance of loan losses for the three months ended June 30, 2023. The fair value of the loan was determined using Level 2 inputs, including bids from a third party broker engaged to solicit interest from potential purchasers. The broker coordinated loan level due diligence with interested parties and established a

formal bidding process in which each participant was required to provide an indicative non-binding bid. Fair value was determined based on a non-binding sale agreement selected by Valley during the bidding process that is expected to close during the third quarter 2023.

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~~June 30, ~~2022,~~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~~June 30, ~~2022,~~2023, collateral dependent loans with a total amortized cost of ~~$171.3~~$125.0 million, including our taxi medallion loan portfolio, were reduced by specific allowance for loan losses allocations totaling ~~$98.2~~$61.0 million to a reported total net carrying amount of ~~$73.1~~$64.0 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~~June 30, 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.

2017

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~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 were as follows:


		Fair Value Hierarchy	September 30, 2022				December 31, 2021					Fair Value Hierarchy	June 30, 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	$	463,318	$	463,318	$	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	1,491,091		1,491,091		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	25,047		25,047		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	66,579		65,675		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	261,197		215,039		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	465,115		438,991		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	2,861,227		2,461,519		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	37,052		29,344		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	75,668		68,380		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)		3,766,838		3,278,948		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	49,440,816		47,472,065		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	225,918		225,918		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	326,959		326,959		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	34,711,633		34,711,633		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	14,908,182		14,783,271		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	1,088,899		1,066,450		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	2,443,533		2,340,324		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	56,934		48,117		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	125,873		125,873		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~~$61.0 million and ~~$36.5~~$48.7 million at ~~September~~June 30, ~~2022~~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~~$3.4 million and ~~$38.1~~$13.4 million at ~~September~~June 30, ~~2022~~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 of $1.2 million and net trading~~ gains of ~~$705~~$226 thousand and $628 thousand for the ~~nine~~three and six months ended ~~September~~June 30, ~~2022and 2021,~~2023, respectively. ~~The~~We recorded net trading ~~gains~~losses of $387 thousand and ~~losses~~$1.4 million for the three and six months ended ~~September~~June 30, 2022, ~~and~~ ~~2021 were not material.~~ respectively.

2118

Available for Sale Debt Securities

The amortized cost, gross unrealized gains and losses and fair value of available for sale debt securities at ~~September~~June 30, ~~2022~~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
June 30, 2023										June 30, 2023
U.S. Treasury securities	U.S. Treasury securities	$	306,748	$	—	$	(28,846)	$	277,902	U.S. Treasury securities	$	310,936	$	—	$	(28,538)	$	282,398
U.S. government agency securities	U.S. government agency securities	29,529		50		(2,758)		26,821		U.S. government agency securities	26,799		19		(2,626)		24,192
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	9,425		—		(776)		8,649
Municipal bonds	Municipal bonds	173,574		—		(44,022)		129,552		Municipal bonds	193,920		—		(31,526)		162,394
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	203,345		—		(32,302)		171,043
Residential mortgage-backed securities	Residential mortgage-backed securities	744,547		66		(97,948)		646,665		Residential mortgage-backed securities	681,513		20		(86,897)		594,636

Corporate and other debt securities	Corporate and other debt securities	197,847		15		(18,959)		178,903		Corporate and other debt securities	192,087		—		(27,410)		164,677
Total	Total	$	1,464,821	$	131	$	(193,098)	$	1,271,854	Total	$	1,414,680	$	39	$	(177,773)	$	1,236,946
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

Accrued interest on investments, which is excluded from the amortized cost of available for sale debt securities, totaled $4.9 million and $5.6 million at June 30, 2023 and December 31, 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition.

The age of unrealized losses and fair value of the related available for sale debt securities at ~~September~~June 30, ~~2022~~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
June 30, 2023														June 30, 2023
U.S. Treasury securities	U.S. Treasury securities	$	277,902	$	(28,846)	$	—	$	—	$	277,902	$	(28,846)	U.S. Treasury securities	$	—	$	—	$	282,398	$	(28,538)	$	282,398	$	(28,538)
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	—		—		22,818		(2,626)		22,818		(2,626)
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	1,223		(20)		7,426		(756)		8,649		(776)
Municipal bonds	Municipal bonds	119,722		(40,475)		9,305		(3,547)		129,027		(44,022)		Municipal bonds	1,405		(20)		137,180		(31,506)		138,585		(31,526)
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	2,628		(40)		144,606		(32,262)		147,234		(32,302)
Residential mortgage-backed securities	Residential mortgage-backed securities	376,683		(39,604)		266,591		(58,344)		643,274		(97,948)		Residential mortgage-backed securities	30,949		(1,919)		562,383		(84,978)		593,332		(86,897)

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	44,404		(7,239)		120,273		(20,171)		164,677		(27,410)
Total	Total	$	962,066	$	(126,371)	$	299,793	$	(66,727)	$	1,261,859	$	(193,098)	Total	$	77,981	$	(9,198)	$	1,132,478	$	(168,575)	$	1,210,459	$	(177,773)
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~~725 and ~~139~~730 at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

As of ~~September~~June 30, ~~2022,~~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~~$847.1 million.

The contractual maturities of available for sale debt securities at ~~September~~June 30, ~~2022~~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


	June 30, 2023
	Amortized Cost		Fair Value
	(in thousands)
Due in one year	$	2,350	$	2,322
Due after one year through five years	282,534		265,870
Due after five years through ten years	175,056		148,811
Due after ten years	273,227		225,307
Residential mortgage-backed securities	681,513		594,636
Total	$	1,414,680	$	1,236,946

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~~7.68 years at ~~September~~June 30, ~~2022.~~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. ~~Val~~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. ~~ley has~~Valley also evaluated available for sale debt securities that are in an unrealized loss position as of ~~September~~June 30, ~~2022~~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 on a comparison of the present value of expected cash flows to the amortized cost, management recognized~~There was no impairment recognized during the three months endedJune 30, 2023 and the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2022.

The following table details the activity in the allowance for credit losses for the six months endedJune 30, 2023.


		Six Months Ended June 30, 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 June 30, 2023 and there was no allowance for credit losses for available for sale debt securities at ~~September~~June 30, 2023, December 31, 2022 and ~~December 31, 2021.~~

June 30, 2022.

2421

Held to Maturity Debt Securities

The amortized cost, gross unrealized gains and losses and fair value of debt securities held to maturity at ~~September~~June 30, ~~2022~~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
June 30, 2023										June 30, 2023
U.S. Treasury securities	U.S. Treasury securities	$	67,075	$	—	$	(1,045)	$	66,030	U.S. Treasury securities	$	66,579	$	—	$	(904)	$	65,675	$	—	$	66,579
U.S. government agency securities	U.S. government agency securities	259,869		—		(45,555)		214,314		U.S. government agency securities	261,197		—		(46,158)		215,039		—		261,197
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	88,561		91		(5,112)		83,540		409		88,152
Municipal bonds	Municipal bonds	382,913		17		(35,961)		346,969		Municipal bonds	376,554		27		(21,130)		355,451		57		376,497
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	465,115		118		(26,242)		438,991		466		464,649
Residential mortgage-backed securities	Residential mortgage-backed securities	2,811,582		250		(438,251)		2,373,581		Residential mortgage-backed securities	2,861,227		906		(400,614)		2,461,519		—		2,861,227
Trust preferred securities	Trust preferred securities	37,038		1		(5,622)		31,417		Trust preferred securities	37,052		1		(7,709)		29,344		559		36,493
Corporate and other debt securities	Corporate and other debt securities	75,267		—		(4,091)		71,176		Corporate and other debt securities	75,668		—		(7,288)		68,380		326		75,342
Total	Total	$	3,722,020	$	284	$	(535,652)	$	3,186,652	Total	$	3,766,838	$	1,025	$	(488,915)	$	3,278,948	$	1,351	$	3,765,487
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

Accrued interest on investments, which is excluded from the amortized cost of held to maturity debt securities, totaled $13.6 million and $13.5 million at June 30, 2023 and December 31, 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition. Held to maturity debt securities are carried net of an allowance for credit losses.

2522

The age of unrealized losses and fair value of related debt securities held to maturity at ~~September~~June 30, ~~2022~~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
June 30, 2023														June 30, 2023
U.S. Treasury securities	U.S. Treasury securities	$	66,030	$	(1,045)	$	—	$	—	$	66,030	$	(1,045)	U.S. Treasury securities	$	30,998	$	(598)	$	34,677	$	(306)	$	65,675	$	(904)
U.S. government agency securities	U.S. government agency securities	213,129		(45,555)		—		—		213,129		(45,555)		U.S. government agency securities	—		—		213,885		(46,158)		213,885		(46,158)
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	25,298		(623)		44,869		(4,489)		70,167		(5,112)
Municipal bonds	Municipal bonds	284,323		(34,193)		7,674		(1,768)		291,997		(35,961)		Municipal bonds	84,224		(1,437)		200,924		(19,693)		285,148		(21,130)
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	109,522		(2,060)		245,793		(24,182)		355,315		(26,242)
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	182,290		(6,756)		2,107,464		(393,858)		2,289,754		(400,614)
Trust preferred securities	Trust preferred securities	—		—		30,416		(5,622)		30,416		(5,622)		Trust preferred securities	—		—		28,343		(7,709)		28,343		(7,709)
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	18,056		(1,194)		50,324		(6,094)		68,380		(7,288)
Total	Total	$	2,044,128	$	(287,840)	$	1,065,621	$	(247,812)	$	3,109,749	$	(535,652)	Total	$	340,866	$	(10,608)	$	2,680,486	$	(478,307)	$	3,021,352	$	(488,915)
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~~811 and ~~108~~802 at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

As of ~~September~~June 30, ~~2022,~~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.~~

$2.4 billion.

2623

The contractual maturities of investments in debt securities held to maturity at ~~September~~June 30, ~~2022~~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					June 30, 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	$	68,033	$	67,619
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	126,908		123,033
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	95,472		87,948
Due after ten years	Due after ten years	596,965		509,682		Due after ten years	615,198		538,829
Residential mortgage-backed securities	Residential mortgage-backed securities	2,811,582		2,373,581		Residential mortgage-backed securities	2,861,227		2,461,519
Total	Total	$	3,722,020	$	3,186,652	Total	$	3,766,838	$	3,278,948

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~~10.05 years at ~~September~~June 30, ~~2022.~~

2023.

2724

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~~June 30, ~~2022~~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)
June 30, 2023
U.S. Treasury securities	$	66,579	$	—	$	—	$	—	$	66,579
U.S. government agency securities	261,197		—		—		—		261,197
Obligations of states and political subdivisions:
Obligations of states and state agencies	65,768		—		5,416		17,377		88,561
Municipal bonds	321,860		—		—		54,694		376,554
Total obligations of states and political subdivisions	387,628		—		5,416		72,071		465,115
Residential mortgage-backed securities	2,861,227		—		—		—		2,861,227
Trust preferred securities	—		—		—		37,052		37,052
Corporate and other debt securities	—		6,000		—		69,668		75,668
Total	$	3,576,631	$	6,000	$	5,416	$	178,791	$	3,766,838
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~~June 30, ~~2022,~~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 to maturity debt securities were carried net of allowance for credit losses totaling $1.7 million at September 30, 2022,~~ ~~and~~ ~~$1.2 million~~ at ~~December 31, 2021. Valley recorded a provision for credit losses of $188 thousand and $531 thousand for the three and nine months ended September 30, 2022, respectively. Valley recorded~~

2825

~~a provision~~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~~six months ended ~~September~~June 30, ~~2021, respectively.~~ 2023 and 2022:


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
	(in thousands)
Beginning balance	$	1,633	$	1,222	$	1,646	$	1,165
(Credit) provision for credit losses	(282)		286		(295)		343
Ending balance	$	1,351	$	1,508	$	1,351	$	1,508

There were no ~~charge-offs~~sales of available for ~~all~~sale and held to maturity debt securities during the ~~respective periods of~~three and six months ended June 30, 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~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was as follows:


		September 30, 2022		December 31, 2021			June 30, 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	$	9,287,309	$	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	27,793,072		25,732,033
Construction	Construction	3,571,818		1,854,580		Construction	3,815,761		3,700,835
Total commercial real estate loans	Total commercial real estate loans	28,065,263		20,790,066		Total commercial real estate loans	31,608,833		29,432,868
Residential mortgage	Residential mortgage	5,177,128		4,545,064		Residential mortgage	5,560,356		5,364,550
Consumer:	Consumer:					Consumer:
Home equity	Home equity	467,135		400,779		Home equity	535,493		503,884
Automobile	Automobile	1,711,086		1,570,036		Automobile	1,632,875		1,746,225
Other consumer	Other consumer	1,063,775		1,000,161		Other consumer	1,252,382		1,064,843
Total consumer loans	Total consumer loans	3,241,996		2,970,976		Total consumer loans	3,420,750		3,314,952
Total loans	Total loans	$	45,185,764	$	34,153,657	Total loans	$	49,877,248	$	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~~$119.1 million an~~d $78.5~~ and $120.5 million at ~~September~~June 30, ~~2022~~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~~$202.1 million and ~~$83.7~~$175.9 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial ~~condition~~.condition.

During the three months ended June 30, 2023, Valley transferred a non-performing construction loan totaling $10.0 million, net of $4.2 million charge-offs from the held for investment loan portfolio to loans held for sale. See Note 6 for further details. There ~~were~~were no sales of loans from the held for investment portfolio during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~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~~June 30, ~~2022~~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
June 30, 2023																		June 30, 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	$	6,229	$	7,468	$	6,599	$	84,449	$	104,745	$	9,182,564	$	9,287,309	$	8,221
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	3,612		—		2,242		82,712		88,566		27,704,506		27,793,072		76,438
Construction	Construction	—		12,969		—		61,098		74,067		3,497,751		3,571,818		14,941		Construction	—		—		3,990		63,043		67,033		3,748,728		3,815,761		15,476
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	3,612		—		6,232		145,755		155,599		31,453,234		31,608,833		91,914
Residential mortgage	Residential mortgage	13,045		5,947		550		26,564		46,106		5,131,022		5,177,128		14,378		Residential mortgage	15,565		1,348		1,165		20,819		38,897		5,521,459		5,560,356		16,151
Consumer loans:	Consumer loans:																	Consumer loans:
Home equity	Home equity	321		168		312		2,845		3,646		463,489		467,135		123		Home equity	959		46		—		2,737		3,742		531,751		535,493		—
Automobile	Automobile	4,999		702		109		286		6,096		1,704,990		1,711,086		—		Automobile	5,963		568		332		248		7,111		1,625,764		1,632,875		—
Other consumer	Other consumer	876		304		—		96		1,276		1,062,499		1,063,775		—		Other consumer	1,509		3,512		674		83		5,778		1,246,604		1,252,382		—
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	8,431		4,126		1,006		3,068		16,631		3,404,119		3,420,750		—
Total	Total	$	44,963	$	22,661	$	31,125	$	293,395	$	392,144	$	44,793,620	$	45,185,764	$	98,745	Total	$	33,837	$	12,942	$	15,002	$	254,091	$	315,872	$	49,561,376	$	49,877,248	$	116,286

3027


		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.

3128

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~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022, as well as the gross loan charge-offs by year of origination for the six months ended June 30, 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
June 30, 2023																				June 30, 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	$	978,383	$	1,233,039	$	987,984	$	490,159	$	267,719	$	565,910	$	4,420,712	$	306	$	8,944,212
Special Mention	Special Mention	15,224		3,433		20,292		5,246		9,320		3,852		56,973		9		114,349		Special Mention	16,582		43,260		3,257		19,948		4,125		7,005		131,677		1,488		227,342
Substandard	Substandard	—		2,279		5,285		2,082		4,467		5,312		71,792		—		91,217		Substandard	6,056		754		3,288		1,706		1,703		2,819		25,681		—		42,007
Doubtful	Doubtful	—		—		—		2,701		2,636		77,112		—		—		82,449		Doubtful	1,500		669		2,768		—		2,674		63,427		2,710		—		73,748

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	$	1,002,521	$	1,277,722	$	997,297	$	511,813	$	276,221	$	639,161	$	4,580,780	$	1,794	$	9,287,309
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	$	3,006,116	$	6,675,372	$	4,997,069	$	3,073,019	$	2,453,918	$	6,040,604	$	542,644	$	3,310	$	26,792,052
Special Mention	Special Mention	102,150		63,572		90,429		43,812		75,328		155,873		15,074		—		546,239		Special Mention	86,078		52,939		51,208		111,268		100,524		205,971		6,621		—		614,609
Substandard	Substandard	17,641		31,910		37,797		40,394		63,254		210,011		8,372		—		409,379		Substandard	10,972		30,664		35,577		27,280		36,320		237,578		7,830		—		386,221
Doubtful	Doubtful	—		—		—		—		—		170		—		—		170		Doubtful	—		—		—		190		—		—		—		—		190

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	$	3,103,166	$	6,758,975	$	5,083,854	$	3,211,757	$	2,590,762	$	6,484,153	$	557,095	$	3,310	$	27,793,072
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	$	390,550	$	702,031	$	342,403	$	32,129	$	18,878	$	20,230	$	2,251,552	$	—	$	3,757,773
Special Mention		12,917		—		—		—				—		13,084		—		26,001

Substandard	Substandard	—		11,376		—		982				17,599		20,183		—		50,140		Substandard	8,538		12,969		7,427		—		955		17,668		3,501		—		51,058
Doubtful	Doubtful	—		643		—		—				12,364		—		—		13,006		Doubtful	—		6,930		—		—		—		—		—		—		6,930
Total construction	Total construction	$	756,637	$	619,460	$	120,837	$	31,228	$	10,572	$	47,032	$	1,986,053	$	—	$	3,571,818	Total construction	$	399,088	$	721,930	$	349,830	$	32,129	$	19,833	$	37,898	$	2,255,053	$	—	$	3,815,761
Gross loan charge-offs																				Gross loan charge-offs	$	—	$	7,288	$	24,658	$	6,479	$	908	$	2,524	$	26	$	—	$	41,883

3229


		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

3330

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~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022, as well as the gross loan charge-offs by year of origination for the six months ended June 30, 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
June 30, 2023																				June 30, 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	$	369,607	$	1,304,327	$	1,524,988	$	562,263	$	455,463	$	1,263,659	$	73,983	$	—	$	5,554,290
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	—		178		—		—		797		5,091		—		—		6,066
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	$	369,607	$	1,304,505	$	1,524,988	$	562,263	$	456,260	$	1,268,750	$	73,983	$	—	$	5,560,356
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	$	19,442	$	45,601	$	11,873	$	4,326	$	4,660	$	17,396	$	392,898	$	38,391	$	534,587
90 days or more past due	90 days or more past due	—		—		—		—		—		—		424		545		969		90 days or more past due	—		—		—		—		—		—		263		643		906
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	19,442		45,601		11,873		4,326		4,660		17,396		393,161		39,034		535,493
Automobile	Automobile																			Automobile
Performing	Performing	589,413		570,603		226,848		188,741		95,798		39,039		—		—		1,710,442		Performing	205,170		633,269		437,528		161,245		123,616		71,682		—		—		1,632,510
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	47		105		73		—		9		131		—		—		365
Total automobile	Total automobile	589,488		570,714		226,926		188,908		95,930		39,120		—		—		1,711,086		Total automobile	205,217		633,374		437,601		161,245		123,625		71,813		—		—		1,632,875
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	17,973		20,979		(1,549)		3,729		8,720		12,707		1,189,191		—		1,251,750
90 days or more past due	90 days or more past due	—		—		—		—		—		—		92		—		92		90 days or more past due	—		—		—		—		—		38		594		—		632
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	17,973		20,979		(1,549)		3,729		8,720		12,745		1,189,785		—		1,252,382
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	$	242,632	$	699,954	$	447,925	$	169,300	$	137,005	$	101,954	$	1,582,946	$	39,034	$	3,420,750
Gross loan charge-offs																				Gross loan charge-offs	$	11	$	226	$	206	$	90	$	428	$	953	$	103	$	—	$	2,017

3431


		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.

3532

The following table shows the amortized cost basis of loans to borrowers experiencing financial difficulty at June 30, 2023 that were modified during the three and six months ended June 30, 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 June 30, 2023		Six Months Ended June 30, 2023
	Term extension			Term extension and interest rate reduction		Total		Term extension		Term extension and interest rate reduction		Total
	($ in thousands)
Commercial and industrial	$	37,762		$	1,482	$	39,244	$	39,033	$	2,003	$	41,036
Commercial real estate	3,512			3,754		7,266		49,617		3,754		53,371
Residential mortgage	578			—		578		790		—		790
Consumer	—			—		—		53		—		53
Total	$	41,852		$	5,236	$	47,088	$	89,493	$	5,757	$	95,250

The following table describes the types of modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2023:

Types of Modifications

Commercial and industrial

12 month term extensions; and one 12 month term extension combined with a reduction in interest rate from 9.38 percent to 6.50 percent

Commercial real estate

6 to 36 month term extensions and one term extension combined with a reduction in interest rate from 8.75 percent to 6.00 percent

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 and six months ended June 30, 2023 were current to their contractual payments as of June 30, 2023.

Valley did not extend any commitments to lend additional funds to borrowers experiencing financial difficulty whose loans had been modified during the three and six months ended June 30, 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~~six months ended ~~September~~June 30, ~~2022 and 2021.~~2022. Post-modification amounts are presented as of ~~September~~June 30, 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 June 30, 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	49	$	82,120	$	78,051
Commercial real estate:

Commercial real estate	Commercial real estate	1	2,187		2,187		5	14,473		14,539		Commercial real estate	1	8,811		8,735
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	7	4,970		4,969

Consumer												Consumer	1	125		124
Total	Total	69	$	67,842	$	64,789	15	$	34,874	$	34,902	Total	58	$	96,026	$	91,879

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


	Six Months Ended June 30, 2022
Troubled Debt Restructurings			Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
		($ in thousands)
Commercial and industrial			60	$	91,804	$	87,685

Commercial real estate			3	14,072		13,986


Residential mortgage			8	5,090		5,087
Consumer			1	125		124
Total			72	$	111,091	$	106,882

The total TDRs presented in the above tables had allocated allowance for loan losses of ~~$71.5~~$56.0 million ~~and $8.2 million~~at ~~September~~June 30, ~~2022 and 2021, respectively.~~2022. There were ~~$3.8 million and $5.4~~$1.5 million in charge-offs related to TDRs for the three and ~~nine~~six months ended ~~September~~June 30, 2022. ~~There were charge-offs of $206 thousand and $6.0 million related to TDRs for the three and nine months ended September 30, 2021, respectively.~~ Valley did not extend any commitments to lend additional funds to borrowers whose loans have been modified as TDRs during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2022.

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

non-performing TDRs totaled $67.3 million and $154.4 million as of June 30, 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~~six months ended ~~September~~June 30, 2022 ~~and 2021~~ were as follows:

Three 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

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


	Three Months Ended June 30, 2022			Six Months Ended June 30, 2022
Troubled Debt Restructurings Subsequently Defaulted	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	($ in thousands)



Construction	2	$	17,599	2	$	17,599



Total	2	$	17,599	2	$	17,599

Loans in ~~Process~~process of ~~Foreclosure.~~foreclosure. Other real estate owned (OREO) totaled $824 thousand and $286 thousand ~~and $2.3 million~~ at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. There were no ~~foreclosed~~foreclosed residential real estate properties included in OREO at ~~September~~June 30, ~~2022~~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 million~~$454 thousand and ~~$2.5~~$2.6 million at ~~September~~June 30, ~~2022~~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~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		September 30, 2022		December 31, 2021			June 30, 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 *	$	77,364	$	94,433
Commercial real estate:

Commercial real estate	Commercial real estate	73,862		110,174		Commercial real estate	138,032		130,199
Construction		41,726		—
Total commercial real estate loans		115,588		110,174

Residential mortgage	Residential mortgage	32,487		35,745		Residential mortgage	16,151		33,865
Home equity	Home equity	—		4		Home equity	—		195
Total	Total	$	277,851	$	241,258	Total	$	231,547	$	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.

Allowance for Credit Losses for Loans

The allowance for credit losses (ACL) for loans consists of the allowance for loan losses and the allowance for unfunded credit commitments. The ACL for loans ~~at September 30, 2022 increased $122.7~~decreased $24.6 million ~~from December 31, 2021 largely reflecting a net ACL of $70.3 million for PCD loans acquired from Bank Leumi USA that was recorded~~ at ~~April 1, 2022 and recognition of a $41.0 million provision related to non-PCD loans and unfunded credit commitments acquired from Bank Leumi USA during the three months ended~~ June 30, 2022. Overall, an increased economic forecast reserve component of our CECL model caused by elevated uncertainty in economic conditions was largely offset by lower expected quantitative loss experience at September 30, 20222023 as compared to December 31, ~~2021.~~

2022.

The following table summarizes the ACL for loans at ~~September~~June 30, ~~2022~~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


	June 30, 2023		December 31, 2022
	(in thousands)
Components of allowance for credit losses for loans:
Allowance for loan losses	$	436,432	$	458,655
Allowance for unfunded credit commitments	22,244		24,600
Total allowance for credit losses for loans	$	458,676	$	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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in thousands)
Components of provision for credit losses for loans:
Provision for loan losses	$	8,159	$	38,310	$	18,138	$	41,568
(Credit) provision for unfunded credit commitments	(1,827)		5,402		(2,356)		5,644
Total provision for credit losses for loans	$	6,332	$	43,712	$	15,782	$	47,212

3835

The following table details the activity in the allowance for loan losses by loan portfolio segment for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~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)
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
Three Months Ended June 30, 2023												Three Months Ended June 30, 2023
Allowance for loan losses:	Allowance for loan losses:											Allowance for loan losses:
Beginning balance	Beginning balance	$	109,689	$	189,139	$	25,303	$	15,193	$	339,324	Beginning balance	$	127,992	$	243,332	$	41,708	$	23,866	$	436,898

Loans charged-off	Loans charged-off	(1,248)		—		—		(771)		(2,019)		Loans charged-off	(3,865)		(6,273)		(149)		(1,040)		(11,327)
Charged-off loans recovered	Charged-off loans recovered	514		29		228		955		1,726		Charged-off loans recovered	2,173		4		135		390		2,702
Net charge-offs												Net charge-offs	(1,692)		(6,269)		(14)		(650)		(8,625)
Provision for loan losses												Provision for loan losses	1,945		2,632		2,459		1,123		8,159
Ending balance												Ending balance	$	128,245	$	239,695	$	44,153	$	24,339	$	436,432
Three Months Ended June 30, 2022												Three Months Ended June 30, 2022
Allowance for loan losses:												Allowance for loan losses:
Beginning balance												Beginning balance	$	101,203	$	219,949	$	28,189	$	13,169	$	362,510
Allowance for purchased credit deteriorated (PCD) loans *												Allowance for purchased credit deteriorated (PCD) loans *	33,452		36,618		206		43		70,319

Loans charged-off												Loans charged-off	(4,540)		—		(1)		(726)		(5,267)
Charged-off loans recovered												Charged-off loans recovered	1,952		224		74		697		2,947
Net (charge-offs) recoveries	Net (charge-offs) recoveries	(734)		29		228		184		(293)		Net (charge-offs) recoveries	(2,588)		224		73		(29)		(2,320)
(Credit) provision for loan losses		(5,078)		10,553		(799)		(1,180)		3,496
Provision for loan losses												Provision for loan losses	12,472		20,436		1,421		3,981		38,310
Ending balance	Ending balance	$	103,877	$	199,721	$	24,732	$	14,197	$	342,527	Ending balance	$	144,539	$	277,227	$	29,889	$	17,164	$	468,819


		Commercial and Industrial		Commercial Real Estate		Residential Mortgage		Consumer		Total
		(in thousands)
Nine Months Ended September 30, 2022
Six Months Ended June 30, 2023												Six Months Ended June 30, 2023
Allowance for loan losses:												Allowance for loan losses:
Beginning balance												Beginning balance	$	139,941	$	259,408	$	39,020	$	20,286	$	458,655
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	(29,912)		(11,971)		(149)		(1,868)		(43,900)
Charged-off loans recovered												Charged-off loans recovered	3,572		28		156		1,151		4,907
Net (charge-offs) recoveries												Net (charge-offs) recoveries	(26,340)		(11,943)		7		(717)		(38,993)
Provision (credit) for loan losses												Provision (credit) for loan losses	15,383		(7,181)		5,138		4,798		18,138
Ending balance												Ending balance	$	128,245	$	239,695	$	44,153	$	24,339	$	436,432
Six Months Ended June 30, 2022												Six Months Ended June 30, 2022
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	$	103,090	$	217,490	$	25,120	$	13,502	$	359,202
Allowance for PCD loans *	Allowance for PCD loans *	33,452		36,618		206		43		70,319		Allowance for PCD loans *	33,452		36,618		206		43		70,319
Loans charged-off		(11,144)		(4,173)		(27)		(2,513)		(17,857)
Charged-off loans recovered		16,012		2,060		694		2,431		21,197
Net recoveries (charge-offs)		4,868		(2,113)		667		(82)		3,340
Provision for loan losses		12,641		15,785		10,164		4,293		42,883
Ending balance		$	154,051	$	267,780	$	36,157	$	17,756	$	475,744
Nine Months Ended September 30, 2021
Allowance for loan losses:
Beginning balance		$	131,070	$	164,113	$	28,873	$	16,187	$	340,243

Loans charged-off	Loans charged-off	(19,283)		(382)		(139)		(3,389)		(23,193)		Loans charged-off	(6,111)		(173)		(27)		(1,551)		(7,862)
Charged-off loans recovered	Charged-off loans recovered	2,781		763		576		3,359		7,479		Charged-off loans recovered	2,776		331		531		1,954		5,592
Net (charge-offs) recoveries	Net (charge-offs) recoveries	(16,502)		381		437		(30)		(15,714)		Net (charge-offs) recoveries	(3,335)		158		504		403		(2,270)
(Credit) provision for loan losses		(10,691)		35,227		(4,578)		(1,960)		17,998
Provision for loan losses												Provision for loan losses	11,332		22,961		4,059		3,216		41,568
Ending balance	Ending balance	$	103,877	$	199,721	$	24,732	$	14,197	$	342,527	Ending balance	$	144,539	$	277,227	$	29,889	$	17,164	$	468,819

* 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.~~

2022.

3936

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~~June 30, ~~2022~~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
June 30, 2023												June 30, 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	$	54,311	$	6,749	$	34	$	—	$	61,094
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	73,934		232,946		44,119		24,339		375,338
Total	Total	$	154,051	$	267,780	$	36,157	$	17,756	$	475,744	Total	$	128,245	$	239,695	$	44,153	$	24,339	$	436,432
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	$	77,364	$	138,032	$	16,151	$	—	$	231,547
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	9,209,945		31,470,801		5,544,205		3,420,750		49,645,701
Total	Total	$	8,701,377	$	28,065,263	$	5,177,128	$	3,241,996	$	45,185,764	Total	$	9,287,309	$	31,608,833	$	5,560,356	$	3,420,750	$	49,877,248
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 June 30, 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,~~2023, Valley performed the annual goodwill impairment test at its normal assessment date. The results of the 2023 annual impairment test resulted in no impairment of goodwill. During the six months ended June 30, 2023, there were no triggering events that would more likely than not reduce the fair value of any reporting unit below its carrying amount. There was no i~~mpairment~~impairment of goodwill recognized during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022 and 2021.~~

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

4037

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~~June 30, ~~2022~~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
June 30, 2023									June 30, 2023
Loan servicing rights	Loan servicing rights	$	119,813	$	(94,956)		$	24,857	Loan servicing rights	$	120,764	$	(98,453)	$	22,311
Core deposits	Core deposits	223,670		(84,511)			139,159		Core deposits	215,620		(99,129)		116,491
Other	Other	51,299		(7,089)			44,210		Other	50,393		(11,249)		39,144
Total other intangible assets	Total other intangible assets	$	394,782	$	(186,556)		$	208,226	Total other intangible assets	$	386,777	$	(208,831)	$	177,946
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 impairment recognized during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022. Valley recorded net recoveries of impairment charges on its loan servicing rights totaling $32 thousand~~2023 and ~~$864 thousand for the three and nine months ended September 30, 2021, respectively.~~

2022.

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~~six months ended ~~September~~June 30, ~~2022~~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:

Loan Servicing
Rights Core
Deposits Other
(in thousands)
2022 $ 865 $ 7,975 $ 1,745
2023 3,195 28,746 6,522
2024 2,817 24,897 5,951
2025 2,471 21,048 5,380
2026 2,156 17,223 4,805


Year	Loan Servicing Rights		Core Deposits		Other
	(in thousands)
2023	$	1,579	$	14,054	$	3,201
2024	2,863		24,897		5,951
2025	2,506		21,048		5,380
2026	2,181		17,223		4,805
2027	1,890		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~~$9.8 million and ~~$5.3~~$11.4 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively and ~~$26.9~~$20.3 million and ~~$16.8~~$15.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Note 10. Deposits

Included in time deposits are certificates of deposit over $250 thousand totaling $2.0 billion and $1.8 billion at June 30, 2023 and December 31, 2022, respectively. Interest expense on time deposits of $250 thousand or more totaled $5.1 million and $444 thousand for the three months ended June 30, 2023 and 2022, respectively and $7.5 million and $545 thousand for the six months ended June 30, 2023 and 2022, respectively.

The scheduled maturities of time deposits as of June 30, 2023 were as follows:


Year	Amount
	(in thousands)
2023	8,020,778
2024	6,574,934
2025	70,994
2026	160,144
2027	41,691
Thereafter	39,641
Total time deposits	$	14,908,182

Note 11. Borrowed Funds

Short-Term Borrowings

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


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(in thousands)					(in thousands)
FHLB advances	FHLB advances	$	785,767	$	500,000	FHLB advances	$	1,000,000	$	24,035

Securities sold under agreements to repurchase	Securities sold under agreements to repurchase	133,516		155,726		Securities sold under agreements to repurchase	88,899		114,694
Total short-term borrowings	Total short-term borrowings	$	919,283	$	655,726	Total short-term borrowings	$	1,088,899	$	138,729

The weighted average interest rate for short-term FHLB advances was ~~3.21~~5.30 percent and ~~0.37~~1.60 percent at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Long-Term Borrowings

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


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(in thousands)					(in thousands)
FHLB advances, net (1)	FHLB advances, net (1)	$	788,574	$	789,033	FHLB advances, net (1)	$	1,688,311	$	788,419
Subordinated debt, net (2)	Subordinated debt, net (2)	752,523		634,643		Subordinated debt, net (2)	755,222		754,639

Total long-term borrowings	Total long-term borrowings	$	1,541,097	$	1,423,676	Total long-term borrowings	$	2,443,533	$	1,543,058


(1)			FHLB advances are presented net of unamortized premiums totaling ~~$574~~$311 thousand and ~~$1.0 million~~$419 thousand at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.
(2)			Subordinated debt is presented net of unamortized debt issuance costs totaling ~~$7.3~~$6.0 million and ~~$5.8~~$6.9 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

FHLB Advances. Long-term FHLB advances had a weighted average interest rate of 3.75 percent and 1.88 percent at ~~both September~~June 30, ~~2022~~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~~June 30, ~~2022~~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	675,000
Thereafter				Thereafter	225,000
Total long-term FHLB advances	Total long-term FHLB advances	$	788,000	Total long-term FHLB advances	$	1,688,000

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 six months ended June 30, 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 and Human Capital Management Committee as appointed by Valley's Board of Directors. The purposes of the 2021~~2023 Plan, ~~are~~Valley may issue awards to ~~provide additional incentives to~~its officers, ~~and key employees of Valley and its subsidiaries, whose substantial contributions are essential to the continued growth and success of Valley, and to attract and retain officers, other~~ employees and non-employee directors ~~whose efforts will result~~ in ~~the continued and long-term growth of Valley's business.~~

~~As of~~ ~~September 30, 2022~~, ~~5.1~~amounts up to 14.5 million shares of common stock, ~~were available~~less one share for ~~issuance~~every share granted after December 31, 2022 under the 2021 Plan. The essential features of each award are described in the award agreement relating to that award. The grant, exercise, vesting, settlement or payment of an award may be based upon the fair value of Valley's common stock on the last sale price reported for Valley's common stock on such date or the last sale price reported preceding such date, except for performance-based awards with a market condition. The grant date fair values of performance-based awards that vest based on a market condition are determined by a third-party specialist using a Monte Carlo valuation model.

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

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

~~Valley granted 234 thousand and 30 thousand of time-based restricted~~Restricted stock units ~~(RSUs) during the three months ended September 30, 2022~~are awarded as performance-based RSUs 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.~~RSUs. The ~~average grant date fair value of the RSUs~~performance-based RSU awards are granted ~~during the nine months ended September 30, 2022 and 2021 was $13.31 per share and $11.98 per share, respectively.~~

~~Valley granted 619 thousand and 604 thousand of performance-based RSUs~~ to certain officers ~~for the nine months ended September 30, 2022~~ and ~~2021, respectively. The performance-based RSU awards~~ include RSUs with vesting conditions based upon certain levels of growth in Valley's tangible book value per share, plus ~~dividends~~dividends; and RSUs, with vesting conditions based upon Valley's total shareholder return as compared to its peer group.

The RSUs “cliff” vest after three years based on the cumulative performance of Valley during that time period. The RSUs earn dividend equivalents (equal to cash dividends paid on Valley's common stock) over the applicable performance period. Dividend equivalents are accumulatedtable below summarizes RSU awards granted and ~~paid to the grantee at the vesting date or forfeited if the performance conditions are not met. The~~average grant date fair ~~value of the performance-based RSUs granted during the nine months ended September 30, 2022 and 2021 was $14.72 per share and $12.36 per share, respectively.~~

~~Valley recorded total stock-based compensation expense of $7.6 million and $5.2 million~~values for the three and six months ended ~~September~~June 30, ~~2022~~2023 and~~2021, respectively, and $21.0 million and $15.9 million for the nine months ended September 30, 2022 and 2021, respectively. The~~ 2022:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in thousands, except per share data)
Award shares granted:
Performance-based RSUs	—		52		723		619
Time-based RSUs	178		937		1,731		2,104
Average grant date fair value per share:
Performance-based RSUs	$	—	$	13.60	$	12.80	$	14.72
Time-based RSUs	$	8.35	$	12.85	$	11.55	$	13.51

Stock award fair values ~~of stock awards~~ are expensed over the shorter of the vesting or required service period. Valley recorded total stock-based compensation expense of $8.7 million and $6.2 million for the three months ended June 30, 2023

and 2022, respectively and $16.8 million and $13.4 million for the six months ended June 30, 2023 and 2022, respectively. As of ~~September~~June 30, ~~2022,~~2023, the unrecognized amortization expense for all stock-based employee compensation totaled approximately ~~$40.0 million and~~$49.4 million. This expense will be recognized over an average remaining vesting period of approximately ~~2.1~~2.0 years. See Note 12 in Valley’s Annual Report on Form 10-K for the year ended December 31, 2022 for details on the stock-based compensation awards.

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.

During the second quarter 2023, Valley terminated six interest rate swaps with a total notional amount of $600 million. The terminated swaps, originally maturing between November 2024 to November 2026, were used to hedge the changes in cash flows associated with certain variable rate loans. The transaction resulted in a pre-tax gain totaling $3.6 million reported in accumulated other comprehensive loss within shareholders' equity that will be amortized to interest income over the life of the previously hedged loans.

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~~June 30, ~~2022,~~2023, Valley had 2836 credit swaps with an aggregate notional amount of ~~$290.7~~$492.8 million related to risk participation agreements.

At ~~September~~June 30, ~~2022,~~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 (modified to the three-month Term SOFR rate effective July 1, 2023) 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							June 30, 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	$	—	$	—	$	—	$	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	—		28,992		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	$	—	$	28,992	$	300,000	$	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*	$	548,592	$	548,217	$	15,837,195	$	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	22,635		21,710		1,331,575		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	393		307		105,948		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	$	571,620	$	570,234	$	17,274,718	$	463,156	$	577,439	$	16,058,364

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

~~The~~During the second quarter 2023, certain cash flow hedges and other non-designated derivative hedging instruments previously cleared through the Chicago Mercantile Exchange and London Clearing House were no longer subject to the variation ~~margins are classified as a~~margin netting under the single-unit of account ~~as settlements of the cash flow hedges and other non-designated derivative instruments. As a result, the~~. At December 31, 2022, fair value of ~~the applicable~~these non-designated derivative ~~assets and liabilities are~~instruments were reported net of variation margin ~~at September 30, 2022 and December 31, 2021 in the table above~~.as settlements using a single-unit of account.

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,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(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 reclassified from accumulated other comprehensive loss to interest income and expense										Amount of (loss) gain reclassified from accumulated other comprehensive loss to interest income and expense	$	(725)	$	116	$	(1,256)	$	(426)
Amount of (loss) gain recognized in other comprehensive loss	Amount of (loss) gain recognized in other comprehensive loss	(6)		(144)		435		(125)		Amount of (loss) gain recognized in other comprehensive loss	(4,991)		121		(1,093)		441

The accumulated after-tax ~~losses~~gains related to effective cash flow hedges included in accumulated other comprehensive loss were ~~$929 thousand~~$2.4 million and ~~$1.3~~$2.2 million at ~~September~~June 30, ~~2022~~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 income and expense as interest payments are ~~made~~received and paid on the hedged variable interest rate assets and liabilities. Valley estimates that ~~$995~~$1.2 million and $238 thousand ~~before tax~~ (before tax) will be reclassified as an increase to interest income and a decrease to interest expense, respectively, over the next 12 months.

~~Gains (losses)~~(Losses) gains 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 June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		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	$	(3,790)	$	76	$	902	$	606
Hedged item - subordinated debt	Hedged item - subordinated debt									Hedged item - subordinated debt

Interest expense	Interest expense	$	325	$	405	$	802	$	322	Interest expense	$	3,952	$	(147)	$	(820)	$	(477)

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~~June 30, ~~2022.~~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)
June 30, 2023						June 30, 2023
Long-term borrowings	Long-term borrowings	$	267,640	$	(32,360)	Long-term borrowings	$	268,300	$	(29,312)
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 $2.4 million and $2.8 million at June 30, 2023 and December 31, 2022, respectively.

The net (gains) 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 June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		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	$	(368)	$	1,143	$	(160)	$	(1,654)

~~Other~~Capital markets income reported in non-interest income included fee income related to non-designated hedge derivative interest rate swaps executed with commercial loan customers and foreign exchange contracts (not designated as hedging instruments) ~~executed~~ with ~~commercial loan customers totaling $10.7~~a combined total of $14.1 million and ~~$8.8~~$13.2 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively and ~~$35.8~~$24.0 million and ~~$22.6~~$27.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, 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~~June 30, ~~2022,~~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 June 30, 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~~June 30, ~~2022~~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
June 30, 2023														June 30, 2023
Assets	Assets													Assets
Interest rate swaps	Interest rate swaps	$	576,213	$	—	$	576,213	$	(914)	$	(374,030)	$	201,269	Interest rate swaps	$	548,592	$	—	$	548,592	$	9,929	$	(468,200)	$	90,321
Liabilities	Liabilities													Liabilities
Interest rate swaps	Interest rate swaps	$	608,483	$	—	$	608,483	$	(914)	$	(454)	$	607,115	Interest rate swaps	$	577,209	$	—	$	577,209	$	(9,929)	$	—	$	567,280

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~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
		(in thousands)					(in thousands)
Other Assets:	Other Assets:					Other Assets:
Affordable housing tax credit investments, net	Affordable housing tax credit investments, net	$	25,139	$	15,343	Affordable housing tax credit investments, net	$	21,427	$	24,198
Other tax credit investments, net	Other tax credit investments, net	52,749		57,006		Other tax credit investments, net	80,145		56,551
Total tax credit investments, net	Total tax credit investments, net	$	77,888	$	72,349	Total tax credit investments, net	$	101,572	$	80,749
Other Liabilities:	Other Liabilities:					Other Liabilities:
Unfunded affordable housing tax credit commitments	Unfunded affordable housing tax credit commitments	$	1,360	$	1,360	Unfunded affordable housing tax credit commitments	$	1,327	$	1,338

Total unfunded tax credit commitments	Total unfunded tax credit commitments	$	1,360	$	1,360	Total unfunded tax credit commitments	$	1,327	$	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~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
		(in thousands)									(in thousands)
Components of Income Tax Expense:	Components of Income Tax Expense:									Components of Income Tax Expense:
Affordable housing tax credits and other tax benefits	Affordable housing tax credits and other tax benefits	$	1,184	$	948	$	3,542	$	2,744	Affordable housing tax credits and other tax benefits	$	1,460	$	1,614	$	2,919	$	2,358
Other tax credit investment credits and tax benefits	Other tax credit investment credits and tax benefits	2,557		2,702		7,647		8,130		Other tax credit investment credits and tax benefits	3,430		2,539		6,651		5,090
Total reduction in income tax expense	Total reduction in income tax expense	$	3,741	$	3,650	$	11,189	$	10,874	Total reduction in income tax expense	$	4,890	$	4,153	$	9,570	$	7,448
Amortization of Tax Credit Investments:	Amortization of Tax Credit Investments:									Amortization of Tax Credit Investments:
Affordable housing tax credit investment losses	Affordable housing tax credit investment losses	$	598	$	681	$	1,666	$	1,684	Affordable housing tax credit investment losses	$	938	$	653	$	1,875	$	1,068
Affordable housing tax credit investment impairment losses	Affordable housing tax credit investment impairment losses	266		387		891		1,159		Affordable housing tax credit investment impairment losses	448		363		896		625
Other tax credit investment losses	Other tax credit investment losses	308		256		1,003		780		Other tax credit investment losses	719		386		725		695
Other tax credit investment impairment losses	Other tax credit investment impairment losses	1,933		1,755		5,634		5,172		Other tax credit investment impairment losses	2,913		1,791		5,775		3,701
Total amortization of tax credit investments recorded in non-interest expense	Total amortization of tax credit investments recorded in non-interest expense	$	3,105	$	3,079	$	9,194	$	8,795	Total amortization of tax credit investments recorded in non-interest expense	$	5,018	$	3,193	$	9,271	$	6,089

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 were determined necessary d~~September 30, 2022.~~

uring the first half of 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 interest 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 in the tables below reflect reclassifications to conform the presentation in those periods to the current operating segment structure. Valley's consolidated results were not impacted by the changes discussed above and remain unchanged for all periods presented.

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


		Three Months Ended September 30, 2022													Three Months Ended June 30, 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	$	8,307,993		$	36,033,901		$	6,189,348		$	50,531,242		Average interest earning assets	$	8,904,483		$	40,553,454		$	7,893,871		$	57,351,808

Interest income	Interest income	$	70,590		$	425,930		$	40,208		$	536,728		Interest income	$	90,602		$	624,569		$	72,288		$	787,459
Interest expense	Interest expense	12,288			53,294			17,154			82,736			Interest expense	55,198			250,871			61,625			367,694
Net interest income	Net interest income	58,302			372,636			23,054			453,992			Net interest income	35,404			373,698			10,663			419,765
Provision (credit) for credit losses	Provision (credit) for credit losses	7,182			(5,347)			188			2,023			Provision (credit) for credit losses	3,492			2,840			(282)			6,050
Net interest income after provision for credit losses	Net interest income after provision for credit losses	51,120			377,983			22,866			451,969			Net interest income after provision for credit losses	31,912			370,858			10,945			413,715
Non-interest income	Non-interest income	19,637			23,510			13,047			56,194			Non-interest income	25,529			14,361			20,185			60,075
Non-interest expense	Non-interest expense	24,352			31,759			205,528			261,639			Non-interest expense	23,223			35,365			224,383			282,971
Internal transfer expense (income)	Internal transfer expense (income)	26,268			113,932			(140,200)			—			Internal transfer expense (income)	22,018			102,395			(124,413)			—
Income before income taxes		$	20,137		$	255,802		$	(29,415)		$	246,524
Income (loss) before income taxes														Income (loss) before income taxes	$	12,200		$	247,459		$	(68,840)		$	190,819
Return on average interest earning assets (pre-tax)	Return on average interest earning assets (pre-tax)	0.97		%	2.84		%	(1.90)		%	1.95		%	Return on average interest earning assets (pre-tax)	0.55		%	2.44		%	(3.49)		%	1.33		%

Three Months Ended September 30, 2021
Consumer
Lending Commercial
Lending Treasury and Corporate Other Total
($ in thousands)
Average interest earning assets $ 7,373,897 $ 25,324,485 $ 5,634,492 $ 38,332,874
Interest income $ 58,887 $ 250,866 $ 19,048 $ 328,801
Interest expense 4,032 13,795 9,948 27,775
Net interest income 54,855 237,071 9,100 301,026
(Credit) provision for credit losses (4,614) 8,110 35 3,531
Net interest income after provision for credit losses 59,469 228,961 9,065 297,495
Non-interest income 11,845 11,611 18,975 42,431
Non-interest expense 13,520 27,504 133,898 174,922
Internal transfer expense (income) 20,662 71,141 (91,803) —
Income (loss) before income taxes $ 37,132 $ 141,927 $ (14,055) $ 165,004
Return on average interest earning assets (pre-tax) 2.01 % 2.24 % (1.00) % 1.72 %


	Three Months Ended June 30, 2022
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	7,967,305		$	34,549,982		$	6,373,943		$	48,891,230

Interest income	$	63,137		$	352,440		$	37,370		$	452,947
Interest expense	4,723			19,735			10,329			34,787
Net interest income	58,414			332,705			27,041			418,160
Provision for credit losses	5,402			38,310			286			43,998
Net interest income after provision for credit losses	53,012			294,395			26,755			374,162
Non-interest income	17,086			14,425			27,022			58,533
Non-interest expense	18,791			24,448			256,491			299,730
Internal transfer expense (income)	37,629			157,365			(194,994)			—
Income (loss) before income taxes	$	13,678		$	127,007		$	(7,720)		$	132,965
Return on average interest earning assets (pre-tax)	0.69		%	1.47		%	(0.48)		%	1.09		%

5147


		Nine Months Ended September 30, 2022													Six Months Ended June 30, 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	$	7,978,732		$	32,551,062		$	6,075,623		$	46,605,417		Average interest earning assets	$	8,836,859		$	39,826,630		$	7,699,305		$	56,362,794

Interest income	Interest income	$	193,186		$	1,036,276		$	100,671		$	1,330,133		Interest income	$	175,918		$	1,194,479		$	137,292		$	1,507,689
Interest expense	Interest expense	20,218			84,356			35,738			140,312			Interest expense	98,204			442,594			111,106			651,904
Net interest income	Net interest income	172,968			951,920			64,933			1,189,821			Net interest income	77,714			751,885			26,186			855,785
Provision for credit losses	Provision for credit losses	14,457			34,590			531			49,578			Provision for credit losses	9,936			5,846			4,705			20,487
Net interest income after provision for credit losses	Net interest income after provision for credit losses	158,511			917,330			64,402			1,140,243			Net interest income after provision for credit losses	67,778			746,039			21,481			835,298
Non-interest income	Non-interest income	50,540			54,815			48,642			153,997			Non-interest income	39,819			30,108			44,447			114,374
Non-interest expense	Non-interest expense	59,711			81,292			617,706			758,709			Non-interest expense	41,472			71,088			442,577			555,137
Internal transfer expense (income)	Internal transfer expense (income)	92,544			371,213			(463,757)			—			Internal transfer expense (income)	52,901			233,990			(286,891)			—
Income before income taxes		$	56,796		$	519,640		$	(40,905)		$	535,531
Income (loss) before income taxes														Income (loss) before income taxes	$	13,224		$	471,069		$	(89,758)		$	394,535
Return on average interest earning assets (pre-tax)	Return on average interest earning assets (pre-tax)	0.95		%	2.13		%	(0.90)		%	1.53		%	Return on average interest earning assets (pre-tax)	0.30		%	2.37		%	(2.33)		%	1.40		%


		Nine Months Ended September 30, 2021													Six Months Ended June 30, 2022
		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	$	7,176,086		$	25,465,276		$	5,261,185		$	37,902,547		Average interest earning assets	$	7,848,764		$	30,743,387		$	6,017,817		$	44,609,968

Interest income	Interest income	$	179,151		$	759,097		$	55,999		$	994,247		Interest income	$	122,596		$	610,346		$	60,463		$	793,405
Interest expense	Interest expense	15,639			55,497			28,511			99,647			Interest expense	7,930			31,062			18,584			57,576
Net interest income	Net interest income	163,512			703,600			27,488			894,600			Net interest income	114,666			579,284			41,879			735,829
(Credit) provision for credit losses		(6,538)			27,825			(353)			20,934
Provision for credit losses														Provision for credit losses	7,275			39,937			343			47,555
Net interest income after provision for credit losses	Net interest income after provision for credit losses	170,050			675,775			27,841			873,666			Net interest income after provision for credit losses	107,391			539,347			41,536			688,274
Non-interest income	Non-interest income	47,445			29,144			40,201			116,790			Non-interest income	30,903			31,305			35,595			97,803
Non-interest expense	Non-interest expense	53,161			80,276			373,591			507,028			Non-interest expense	35,359			49,533			412,178			497,070
Internal transfer expense (income)	Internal transfer expense (income)	60,026			212,931			(272,957)			—			Internal transfer expense (income)	66,276			257,281			(323,557)			—
Income (loss) before income taxes	Income (loss) before income taxes	$	104,308		$	411,712		$	(32,592)		$	483,428		Income (loss) before income taxes	$	36,659		$	263,838		$	(11,490)		$	289,007
Return on average interest earning assets (pre-tax)	Return on average interest earning assets (pre-tax)	1.94		%	2.16		%	(0.83)		%	1.70		%	Return on average interest earning assets (pre-tax)	0.93		%	1.72		%	(0.38)		%	1.30		%

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.

5248

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 impact of Federal Reserve actions affecting the level of market interest rates and increases in business failures, specifically among our clients, as well as on our business, our employees and our ability to provide services to our customers;

•the impact of recent and possible future bank failures on the business environment in which we operate and resulting market volatility and reduced confidence in depository institutions, including impact on stock price, customer deposit withdrawals from Valley National Bank, or business disruptions or liquidity issues that have or may affect our customers;

•the impact of unfavorable macroeconomic conditions or downturns, instability or 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 geopolitical instabilities or events; natural and other disasters (including severe weather events) and health emergencies, acts of terrorism or other external events;

•risks associated with our acquisition of Bank Leumi Le-Israel Corporation (Bank Leumi USA), including (i) the inability to realize expected cost savings and synergies from the ~~Bank Leumi USA~~ acquisition in the amounts or timeframe ~~anticipated;~~

•anticipated and (ii) greater than expected costs or difficulties relating to ~~Bank Leumi USA~~ integration matters;

•the 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 ~~retain customers and qualified employees 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 in business failures, specifically among our clients;

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

•~~continued deterioration in general business and economic conditions or turbulence in domestic or global financial markets;~~

•the impact of forbearances or deferrals we are required or agree to as a result of customer requests and/or government actions, including, but not limited to our potential inability to recover fully deferred payments from the borrower or the collateral;

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

•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 in the economy, mainly in New Jersey, New York, Florida, Alabama, California, and Illinois, as well as an unexpected decline in commercial real estate values within our market areas;

•~~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;~~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;

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

•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 ~~loss~~risks related to the replacement of ~~or decrease in lower-cost funding sources within our deposit base,~~the London Interbank Offered Rate with Secured Overnight Financing Rate and other reference rates, including ~~our inability to achieve deposit retention targets under Valley's branch transformation strategy;~~increased expenses, 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;

fiduciary responsibility, negligence, fraud, environmental laws, patent or trademark infringement, employment related claims, and other matters;

•changes to laws and regulations, including changes affecting oversight of the financial services industry; changes in the enforcement and interpretation of such laws and regulations; and changes in accounting and 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;

•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~~June 30, ~~2022,~~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~~At June 30, ~~2022,~~2023, Valley had consolidated total assets of approximately ~~$55.9~~$61.7 billion, total net loans of ~~$44.7~~$49.4 billion, total deposits of ~~$45.3~~$49.6 billion and total shareholders’ equity of ~~$6.3~~$6.6 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. Our most recent bank acquisition is discussed below.~~

~~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". At the acquisition date, Bank Leumi USA had approximately $8.1 billion in assets, $5.9 billion of loans and $7.0 billion of deposits, after purchase accounting adjustments. Valley issued approximately 85 million shares of common stock and paid $113.4 million in cash in 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 for additional details regarding theacquisitions, including our acquisition of Bank Leumi USA ~~and other recent acquisition activities.~~on April 1, 2022.

~~Impact~~Industry Developments. The combination of ~~COVID-19.~~ rapidly rising interest rates, increased competition and economic uncertainty continues to weigh on the banking industry in the wake of the recent bank failures. We have consistently operated the Bank with a focus on diversification to maintain stability through various economic cycles. During the ~~third~~second quarter ~~2022, worldwide inflationary concerns~~2023, we continued to ~~outweigh~~position our balance sheet to mitigate potential risks from the ~~other negative impacts~~market uncertainty affecting the banking industry in general and Valley, its clients and communities in particular.

•Total assets decreased to $61.7 billion at June 30, 2023, a decrease of ~~COVID-19. Among other factors, China's "zero COVID" policy has created disruption~~4.1 percent from March 31, 2023. Liquidity remained strong with total liquid assets of ~~China's manufacturing industry which could have prolonged negative consequences for the global economy as China exports up to one-third~~approximately $13.1 billion at June 30, 2023, representing 6.0 percent of ~~the world's intermediate goods. W~~interest earning assets. eWe continue to ~~monitor the impact of COVID-19 including the emergence of new variants closely, including its impact on our employees, customers, communities~~maintain significant access to readily available, diverse funding sources to fulfill both short-term and ~~results of operations and other government or Federal Reserve actions.~~long-term funding needs. See "Bank Liquidity" section for additional information.

•Total deposits increased $2.0 billion to $49.6 billion at June 30, 2023 as compared to $47.6 billion at March 31, 2023 largely due to higher CD balances. See the ~~"Operating Environment"~~"Deposits and Other Borrowings" 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~~•Capital remained strong with ratios of both Valley and the ~~American Rescue Plan Act~~Bank exceeding all capital adequacy requirements at June 30, 2023. Total shareholders' equity increased $63.6 million to $6.6 billion at June 30, 2023 as compared to March 31, 2023. See the "Capital Adequacy" section for additional details.

•Total loans increased $1.2 billion, or 10.0 percent on an annualized basis to $49.9 billion at June 30, 2023 from March 31, 2023 mainly due to continued organic loan growth in commercial loan categories and relatively low levels of ~~2021 provided funding~~prepayment activity during the second quarter 2023. See "Loan Portfolio" section for more information.

•Asset quality continued to reflect our disciplined underwriting and lending practices during 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~~second quarter ~~(including $35.5 mi~~2023. Non-performing assets (NPAs) as a percentage of total loans and NPAs totaled 0.51 percent and 0.50 percent at June 30, 2023 and March 31, 2023, respectively. See the "Non-Performing Assets" section for additional information.

•~~llion acquired from Bank Leumi USA)~~Total investment securities were $5.1 billion, or 8.2 percent of ~~PPP loans still outstanding.~~total assets, at June 30, 2023 and remained relatively unchanged as compared to March 31, 2023. See the "Investment Securities Portfolio" section for more details.

Quarterly Results. Net income for the ~~third~~second quarter ~~2022~~2023 was ~~$178.1~~$139.1 million, or ~~$0.34~~$0.27 per diluted common share as compared to ~~$122.6~~$96.4 million, or ~~$0.29~~$0.18 per diluted common share, for the ~~third~~second quarter ~~2021.~~2022. The ~~$55.5~~$42.6 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~~$37.9 million decrease in our provision for credit losses mainly due to a provision related to non-PCD loans and unfunded credit commitments acquired from Bank Leumi USA in the second quarter 2022;

•a $1.6 million increase in net interest income mainly due to increased yields on both new loan originations and adjustable-rate loans and higher average loan balances, ~~driven~~largely offset by ~~both acquired and organic loan volumes and~~the increased ~~yields on new and adjustable-rate loans;~~cost of deposits;

•a ~~$13.8~~$1.5 million increase in non-interest income primarily ~~driven by increases~~due to an increase in capital markets fees and 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~~net gains on sales of ~~residential mortgage loans;~~loans; and

•a ~~$1.5~~$16.8 million decrease in non-interest expense was due, in part, to a $40.2 million decrease in ~~our provision for credit losses,~~merger expenses, partially offset ~~by:~~by a $11.2 million restructuring charge and various other increases;

•an $86.7 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; andThese items were partially offset by:

•a ~~$26.0~~$15.2 million increase in income tax expense mostly due to higher pre-tax income in the ~~third~~second 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~~second quarter ~~2022~~2023 results.

~~Operating Environment.~~U.S. Economic Conditions. During ~~the third~~the second quarter ~~of 2022,~~2023, real gross domestic product (GDP) increased ~~2.8~~at an annual rate of 2.4 percent as compared to ~~a decline~~an increase of ~~0.6~~2.0 percent during the first quarter 2023. The 2.4 percent increase in real GDP reflected robust consumer spending, private inventory investment, nonresidential fixed investment, and government spending, as well as improved supply chain. Inflation moderately cooled, but remained well above the Federal Reserve’s target of 2 percent in the second quarter ~~of 2022. The increase in economic activity was driven in large part by household spending on goods and services, 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 fixed investment, inventory restocking and government spending increased at a tepid rate.

2023.

During the ~~third~~first quarter ~~2022,~~2023, the Federal Reserve raised the target range for the federal funds rate by ~~150~~an additional 25 basis points in May 2023 and paused rate increases in June to ~~a target range~~observe the full impact of ~~3.00 percent to 3.25 percent at~~its changes over the ~~end of the third quarter. Following its meeting in November,~~past year. In July 2023, the Federal Reserve raised the ~~federal fund rate~~target again by another 7525 basis points to a ~~target~~ range of ~~3.75 percent~~5.25 to ~~4.00~~5.5 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. These actions reflect the Federal Reserve’s strong commitment to returning inflation to its 2 percent objective.

The 10-year U.S. Treasury note yield ended the ~~third~~second quarter ~~of 2022~~2023 at ~~3.83~~3.81 percent, 85or 33 basis points higher as compared to ~~June 30, 2022. The spread between~~ the 2-first quarter 2023, and ~~10-year~~the 2-year U.S. Treasury note ~~yields~~yield ended the second quarter 2023 at ~~negative 0.39~~4.87 percent, ~~a 45~~or 81 basis ~~point decline from June 30, 2022.~~

points higher as compared to the first quarter 2023.

For all U.S. 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.~~loans decreased approximately by 1.3 percent at June 30, 2023 as compared to March 31, 2023, while consumer loans increased by 1.3 percent. 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 as~~remained flat compared to the ~~second~~prior quarter. Overall the commercial real estate market was constricted by the financial environment this quarter ~~but loan growth remained at robust levels partly due to slower paydowns on existing loans due to the~~as 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 ~~on customer~~eroded investment profitability. Despite higher mortgage rates, demand ~~and selective tightening of certain underwriting standards~~for residential real estate remained steady, although sales were constrained by ~~Valley.~~low inventories.

~~Further expected~~While many economic measures continue to defy recessionary concerns, further increases in market interest rates, ~~persistently~~the inverted yield curve, high inflation, 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~~created a ~~recession.~~challenging banking environment. 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~~$311.6 million to ~~$44.8~~$47.5 billion for the ~~third~~second quarter ~~2022~~2023 as compared to the ~~second~~first quarter ~~2022~~ 2023 mostly due to ~~growth in our~~higher time deposits driven by successful retail ~~and brokered~~ CD ~~portfolios. The retail growth resulted from strategic CD campaigns, while the brokered CD growth resulted from~~ ~~our~~generation and increased utilization of ~~brokered~~fully insured indirect customer (i.e., brokered) deposits, partially offset by a decrease in average non-interest bearing deposits. The decline in non-interest bearing deposits was largely due to a moderate shift in customer balances to our interest bearing deposit products in a rising interest rate environment and outflows due to attractive investment alternatives to deposits in the marketplace. Average non-interest-bearing deposits; savings,

NOW and money market deposits; and time deposits represented approximately 27 percent, 47 percent and 26 percent of total deposits as of June 30, 2023, respectively.

Actual ending balances for deposits increased $2.0 billion to approximately $49.6 billion at June 30, 2023 from March 31, 2023 mainly due to a ~~favorable funding alternative, during the~~ ~~third quarter 2022~~. ~~Average non-interest-bearing~~$3.8 billion increase in time deposits, partially offset by decreases in non-interest bearing deposits, and savings, NOW and money market deposits totaling $1.1 billion and $626.1 million, respectively. The increase in time deposits from March 31, 2023 was partially driven by higher fully-insured indirect customer CD balances at June 30, 2023. Total fully-insured indirect customer deposits, consisting of both brokered time deposit and money market accounts, increased $3.2 billion to $10.3 billion at June 30, 2023 from March 31, 2023. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 3625 percent, 5345 percent and 1230 percent of total deposits as of ~~September 30, 2022, respectively.~~

~~Actual ending balances for deposits increased $1.4 billion to approximately $45.3 billion at September 30, 2022 from~~ June 30, 2022 largely due to the increased utilization of brokered deposits, consisting of both money market and time deposit accounts, in our funding mix. Total brokered deposits increased to $3.7 billion at September 30, 20222023, respectively, as compared to ~~$2.3 billion~~29 percent, 48 percent and 23 percent of total deposits as of March 31, 2023, respectively.

The following table lists, by maturity, uninsured certificates of deposit at June 30, ~~2022. Non-interest bearing~~2023:



	(in thousands)
Less than three months	$	410,010
Three to six months	445,585
Six to twelve months	922,713
More than twelve months	261,279
Total	$	2,039,587

Total estimated uninsured deposits, ~~decreased $718.9 million~~excluding collateralized government deposits and intercompany deposits (i.e., deposits eliminated in consolidation), totaled approximately $12.1 billion, or 24 percent of total deposits, at ~~September~~June 30, ~~2022~~2023 as compared to ~~June 30, 2022 largely~~$14.9 billion, or 31 percent of total deposits, at March 31, 2023.

While our diversified commercial and consumer deposit base has remained relatively stable during the early stages of the third quarter 2023, deposit gathering initiatives could remain challenging due to ~~fluctuations in certain commercial customer balances,~~market competition, attractive investment alternatives, such as ~~well as some migration of both commercial~~U.S. Treasury securities, and ~~retail balances to interest bearing deposit products. While our overall deposit levels increased during the~~ ~~third quarter 2022, we believe the current operating environment will likely remain very challenging for Valley’s deposit gathering initiatives.~~other factors. As a result, we cannot guarantee that we will be able to maintain deposit levels at or near those reported at ~~September~~June 30, ~~2022.~~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						Six Months Ended
		September 30, 2022		June 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021			June 30, 2023		March 31, 2023		June 30, 2022		June 30, 2023		June 30, 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	$	3,656,593	$	2,513,983	$	822,913	$	3,088,445	$	629,753
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	99,327		99,546		142,790		99,436		145,666
Federal funds purchased	Federal funds purchased	437,196		637,495		—		363,550		8,681		Federal funds purchased	122,537		190,214		637,495		156,188		326,116
Total	Total	$	1,016,240	$	1,603,198	$	860,474	$	1,072,791	$	966,544	Total	$	3,878,457	$	2,803,743	$	1,603,198	$	3,344,069	$	1,101,535

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	$	1,523,500	$	875,053	$	788,803	$	1,201,068	$	788,879
Subordinated debt	Subordinated debt	632,627		617,291		638,349		626,997		499,124		Subordinated debt	759,334		754,972		617,291		757,165		624,135
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	56,893		56,805		56,544		56,848		56,501

Total	Total	$	1,477,909	$	1,462,638	$	1,595,814	$	1,472,344	$	2,037,312	Total	$	2,339,727	$	1,686,830	$	1,462,638	$	2,015,081	$	1,469,515

Average short-term borrowings increased ~~$155.8 million~~$1.1 billion during the ~~third~~second quarter ~~2022~~2023 as compared to the ~~third~~first quarter ~~2021~~2023 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.~~advances in March 2023 to 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 $652.9 million ~~from~~as compared to the ~~third~~first quarter ~~2021 largely~~2023 mainly due to the ~~repayment of long-term repurchase agreements during the third quarter 2021 and, to a lesser extent, maturities of~~new FHLB advances ~~over~~issued in March 2023 and the ~~last 12 months.~~second quarter 2023.

Actual ending balances for short-term borrowings decreased ~~$603.5 million~~$5.3 billion to $919.3 million at September 30, 2022 as compared to June 30, 2022 largely due to the maturity of FHLB advances during the third quarter 2022 and our increased utilization of broker deposits, as a favorable alternative funding source, in our funding mix at September 30, 2022. Long-term borrowings increased to approximately $1.5 billion at September 30, 2022 as compared to $1.4$1.1 billion at June 30, ~~2022 primarily~~2023 as compared to March 31, 2023 mainly due to maturities and repayment of FHLB advances. In March 2023, we increased our short-term borrowings to bolster our liquidity position out of an abundance of caution in the ~~issuance~~wake of ~~new subordinated notes~~the two bank failures and subsequently managed these balances to a lower level during the ~~third~~second quarter ~~2022. On September 20, 2022, Valley issued $150 million~~2023, partially through the greater use of ~~6.25 percent fixed-to-floating rate subordinated notes due September~~time deposits. We continue to closely monitor changes in the current banking environment and have substantial access to additional liquidity. Actual ending balances for long-term borrowings totaled $2.4 billion at June 30, ~~2032. At September 30, 2022,~~2023 and remained relatively unchanged as compared to March 31, 2023. 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 annualized performance ratios:


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Selected Performance Indicators	($ in thousands)
GAAP measures:
Net income, as reported	$	139,060		$	96,413		$	285,611		$	213,141
Return on average assets	0.90		%	0.72		%	0.94		%	0.88		%
Return on average shareholders’ equity	8.50			6.18			8.80			7.51
Non-GAAP measures:
Net income, as adjusted	$	147,081		$	165,803		$	301,611		$	286,116
Return on average assets, as adjusted	0.95		%	1.25		%	0.99		%	1.18		%
Return on average shareholders' equity, as adjusted	8.99			10.63			9.29			10.09
Return on average tangible shareholders' equity (ROATE)	12.37			9.33			12.87			11.07
ROATE, as adjusted	13.09			16.05			13.59			14.87
Efficiency ratio	55.59			50.78			54.69			51.81


	June 30, 2023		December 31, 2022
Common Equity Per Share Data:






Book value per common share (GAAP)	$	12.54	$	12.23
Tangible book value per common share (non-GAAP)	8.51		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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in thousands)
Net income, as reported (GAAP)	$	139,060	$	96,413	$	285,611	$	213,141

Add: Losses (gains) on available for sale and held to maturity debt securities, net (net of tax) (a)	6		(56)		23		(50)
Add: Restructuring charge (net of tax) (b)	8,015		—		8,015		—
Add: Provision for credit losses for available for sale securities (c)	—		—		5,000		—
Add: Non-PCD provision for credit losses, (net of tax) (d)	—		29,282		—		29,282
Add: Merger related expenses (net of tax) (e)	—		40,164		2,962		43,743


Net income, as adjusted (non-GAAP)	$	147,081	$	165,803	$	301,611	$	286,116

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

(b) Represents ~~the~~severance expense related to workforce reductions within salary and employee benefits expense.

(d) Represents provision for credit losses for non-PCD loans and unfunded credit commitments ~~and held to maturity debt securities~~ acquired ~~from Bank Leumi USA on April 1, 2022.~~during the period.

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

~~(d)~~

~~Included in professional and legal fees.~~

5855

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.~~transactions reported in capital markets fees. 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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
	($ in thousands)
Net income, as adjusted (non-GAAP)	$	147,081		$	165,803		$	301,611		$	286,116
Average assets	$	61,877,464		$	53,211,422		$	60,877,792		$	48,417,469
Annualized return on average assets, as adjusted (non-GAAP)	0.95		%	1.25		%	0.99		%	1.18		%

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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
	($ in thousands)
Net income, as adjusted (non-GAAP)	$	147,081		$	165,803		$	301,611		$	286,116
Average shareholders' equity	$	6,546,452		$	6,238,985		$	6,493,627		$	5,673,014
Annualized return on average shareholders' equity, as adjusted (non-GAAP)	8.99		%	10.63		%	9.29		%	10.09		%

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,
2022 2021 2022 2021
($ in thousands)
Net income, as reported (GAAP) $ 178,119 $ 122,580 $ 391,260 $ 358,802
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
Less: Average goodwill and other intangible assets 2,117,818 1,446,760 1,917,217 1,449,285
Average tangible shareholders’ equity $ 4,138,949 $ 3,348,083 $ 3,952,519 $ 3,269,675
Annualized ROATE (non-GAAP) 17.21 % 14.64 % 13.20 % 14.63 %
Annualized ROATE, as adjusted (non-GAAP) 17.54 % 14.90 % 15.77 % 14.97 %


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
	($ in thousands)
Net income, as reported (GAAP)	$	139,060		$	96,413		$	285,611		$	213,141
Net income, as adjusted (non-GAAP)	147,081			165,803			301,611			286,116
Average shareholders’ equity (GAAP)	$	6,546,452		$	6,238,985		$	6,493,627		$	5,673,014
Less: Average goodwill and other intangible assets	2,051,591			2,105,585			2,056,487			1,823,538
Average tangible shareholders’ equity (non-GAAP)	$	4,494,861		$	4,133,400		$	4,437,140		$	3,849,476
Annualized ROATE (non-GAAP)	12.37		%	9.33		%	12.87		%	11.07		%
Annualized ROATE, as adjusted (non-GAAP)	13.09		%	16.05		%	13.59		%	14.87		%

5956

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 %


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
	($ in thousands)
Total non-interest expense, as reported (GAAP)	$	282,971		$	299,730		$	555,137		$	497,070

Less: Restructuring charge (pre-tax) (a)	11,182			—			11,182			—
Less: Amortization of tax credit investments (pre-tax)	5,018			3,193			9,271			6,089
Less: Merger related expenses (pre-tax) (b)	—			54,496			4,133			59,124
Total non-interest expense, as adjusted (non-GAAP)	$	266,771		$	242,041		$	530,551		$	431,857
Net interest income, as reported (GAAP)	$	419,765		$	418,160		$	855,785		$	735,829
Total non-interest income, as reported (GAAP)	60,075			58,533			114,374			97,803
Add: Losses (gains) on available for sale and held to maturity debt securities, net (pre-tax) (c)	9			(78)			33			(69)
Total net interest income and non-interest income, as adjusted (non-GAAP)	$	479,849		$	476,615		$	970,192		$	833,563

Efficiency ratio (non-GAAP)	55.59		%	50.78		%	54.69		%	51.81		%

(a) Represents severance expense related to workforce reductions within salary and employee benefits expense.

(b)Included primarily within salary and employee benefits ~~expense, technology, furniture and equipment expense, and professional and legal fees for the nine months ended September 30, 2022.~~

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

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


	June 30, 2023		December 31, 2022
	($ in thousands, except for share data)
Common shares outstanding	507,619,430		506,374,478
Shareholders’ equity (GAAP)	$	6,575,184	$	6,400,802
Less: Preferred stock	209,691		209,691
Less: Goodwill and other intangible assets	2,046,882		2,066,392
Tangible common shareholders’ equity (non-GAAP)	$	4,318,611	$	4,124,719
Book value per common share (GAAP)	$	12.54	$	12.23
Tangible book value per common share (non-GAAP)	$	8.51	$	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.~~

N~~et interest income~~ on a tax equivalent basis totaling ~~$455.3~~$421.3 million for the ~~third~~second quarter ~~2022 increased $35.7~~2023 decreased $16.2 million as compared to the ~~second~~first quarter ~~2022~~2023 and increased ~~$153.6~~$1.7 million ~~from the third quarter 2021. Interest income on a tax equivalent basis in the third quarter 2022 increased $83.7 million to $538.0 million~~ as compared to the second quarter 2022. The decrease as compared to the first quarter 2023 was mainly due to a $3.3 billion increase in average interest bearing liabilities and higher interest rates on most interest bearing deposit products and short-term borrowings, partially offset by higher loan yields. As a result, interest expense increased $83.5 million to $367.7 million for the second quarter 2023 as compared to the first quarter 2023. Interest income on a tax equivalent basis increased $67.3 million to $789.0 million in the second quarter 2023 as compared to the first quarter 2023. The increase was mostly due to higher ~~average loan balances driven by our organic loan growth and increased~~ yields on both new originations and adjustable rate loans in our ~~portfolio. Interest expense~~portfolio and a $1.6 billion increase in average loan balances driven by organic new loan volumes and a continuation of ~~$82.7 million~~slower loan prepayments.

Average interest earning assets increased $8.5 billion to $57.4 billion for the ~~third~~second quarter ~~2022 increased $47.9 million~~2023 as compared to the second quarter 2022 ~~largely~~mainly due to ~~higher interest rates on both non-maturity deposits~~a $6.9 billion increase in average loan balances and ~~short-term borrowings, as well as a $1.5~~$1.4 billion increase in average interest bearing ~~liabilities.~~cash balances largely due to higher excess cash held overnight as part of our prudent liquidity management navigating the fallout from the recent bank failures. Compared to the first quarter 2023,

6057

~~Average interest earning assets increased $12.2 billion to $50.5 billion for the third quarter 2022 as compared to the third quarter 2021~~ ~~primarily due to the acquisitions 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. Compared to the second quarter 2022,~~ average interest earning assets increased by ~~$1.6~~$2.0 billion during the ~~third~~second quarter ~~2022.~~2023. The increase was primarily driven by a ~~$1.8~~$1.6 billion increase in average loan balances mainly due to organic commercial loan growth ~~mainly~~and a $351.6 million increase in average interest bearing cash as compared to the ~~commercial loan categories, as well as residential mortgage loans.~~prior linked quarter.

Average interest bearing liabilities increased ~~$5.9~~$11.2 billion to ~~$31.2~~$40.9 billion for the ~~third~~second quarter ~~2022~~2023 as ~~compared to the third quarter 2021~~ ~~mainly due to~~ ~~$2.5 billion~~ of interest bearing deposits assumed from Bank Leumi USA, growth in commercial and retail customer deposit balances without stated maturities and brokered deposits, and $727 million of interest bearing deposits assumed from Westchester. As compared to the second quarter 2022 mainly due to increases of $8.1 billion and $2.3 billion in average time deposits and short-term borrowings, respectively. The increases in average time deposits and short-term borrowings were largely due to the enhanced liquidity management efforts during the first half of 2023, including increased usage of fully FDIC-insured indirect customer CD and successful retail CD initiatives. As compared to the first quarter 2023, average interest bearing liabilities increased by ~~$1.5~~$3.3 billion in the ~~third~~second quarter ~~2022 mainly~~2023 largely due to ~~growth~~a $2.5 billion increase in ~~our~~average time deposits mainly driven by increased usage of fully FDIC-insured indirect customer CD and successful retail ~~and brokered~~ CD ~~portfolios, partially offset by maturities and less use of~~initiatives, as well as an increase in short-term borrowings, as apart of our funding ~~source. The retail growth resulted from successful targeted CD campaigns, while the brokered CD growth resulted from~~ ~~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.~~and liquidity sources. 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 percent for the third quarter 2022 increased by 17 basis points and 45 basis points from 3.43 percent and 3.15~~2.94 percent for the second quarter 2023 decreased by 22 basis points and 49 basis points from 3.16 percent and 3.43 percent for the first quarter 2023 and the second quarter 2022, respectively. The decrease as compared to the first quarter 2023 was largely driven by higher interest rates on interest bearing deposits and ~~third quarter 2021, respectively. The~~short-term borrowings, partially offset by a 29 basis point increase in the yield on average interest earning assets increased by 54 basis points on a linked quarter basis mostly due to the aforementioned higher yields on new and adjustable rate loans in the third quarter 2022 as compared to the second quarter 2022. assets. The yield on average loans increased by 5730 basis points to ~~4.48~~5.78 percent for the ~~third~~second quarter ~~2022~~2023 as compared to the ~~second~~first quarter ~~2022~~2023 largely due to ~~the~~ higher ~~level of market~~ interest ~~rates.~~rates on new originations and adjustable rate loans. The yields on average taxable and non-taxable investments also increased 913 basis points and 2516 basis points, respectively, from the ~~second~~first quarter ~~2022 largely~~2023 mostly 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.~~first half of 2023. Our cost of total average deposits increased to ~~0.59 percent for the third quarter 2022 from 0.19~~2.45 percent for the second quarter ~~2022.~~2023 from 1.96 percent and 0.19 percent for the first quarter 2023 and the second quarter 2022, respectively. The overall cost of average interest bearing liabilities also increased 5957 basis points to ~~1.06~~3.59 percent for the ~~third~~second quarter ~~2022~~2023 as compared to the ~~second~~first quarter ~~2022. The increased cost of funds was mainly due to higher~~2023 primarily driven by the rising market interest rates on ~~most of our interest bearing deposit products combined with greater utilization of brokered and retail CDs in our funding mix~~deposits during the ~~third quarter 2022.~~first half of 2023.

~~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~~Based upon our 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,estimates at ~~higher rates. Funding costs also increased during the third quarter 2022 and the early stages of the fourth quarter 2022, however at this time,~~June 30, 2023, we ~~expect a continued benefit to our~~anticipate net interest income ~~from~~growth in the ~~immediate repricing~~low single digits (i.e., less than 10 percent) for the full year of ~~certain earning assets and a degree~~2023, revised down from 16 to 18 percent previously estimated in the MD&A of ~~lag~~Valley's Form 10-K for the year ended December 31, 2022. While we are seeing initial signs of stabilization in ~~higher funding costs due to the current market and our ability to manage the balance sheet. While our outlook for our~~ net interest income and margin as compared to the declines in both experienced in the ~~fourth~~first quarter ~~2022 and beyond is positive,~~2023, 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~~ second quarter ~~2022.~~2023.

6158

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

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

Net Interest Income on a Tax Equivalent Basis

Three Months Ended
September 30, 2022 June 30, 2022 September 30, 2021
Average
Balance Interest Average
Rate Average
Balance Interest Average
Rate Average
Balance Interest Average
Rate
($ in thousands)
Assets
Interest earning assets:
Loans (1)(2)
$ 44,341,894 $ 496,545 4.48 % $ 42,517,287 $ 415,602 3.91 % $ 32,698,382 $ 309,778 3.79 %
Taxable investments (3)
4,815,181 31,002 2.58 4,912,994 30,610 2.49 3,302,803 15,797 1.91
Tax-exempt investments (1)(3)
635,795 6,501 4.09 684,471 6,571 3.84 429,941 3,302 3.07
Interest bearing deposits with banks 738,372 3,996 2.16 776,478 1,569 0.81 1,901,748 642 0.14
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
Allowance for credit losses (486,747) (428,193) (346,437)
Cash and due from banks 426,796 426,187 213,452
Other assets 4,499,739 4,362,789 3,314,308
Unrealized gains on securities available for sale, net (112,724) (40,591) 29,733
Total assets $ 54,858,306 $ 53,211,422 $ 41,543,930
Liabilities and shareholders’ equity
Interest bearing liabilities:
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 %
Time deposits 5,192,896 15,174 1.17 3,601,088 3,269 0.36 4,126,253 4,394 0.43
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
Short-term borrowings 1,016,240 5,160 2.03 1,603,198 4,083 1.02 860,474 1,464 0.68
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
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
Non-interest bearing deposits 16,035,778 16,267,946 10,701,948
Other liabilities 1,337,022 1,010,220 692,979
Shareholders’ equity 6,256,767 6,238,985 4,794,843
Total liabilities and shareholders’ equity $ 54,858,306 $ 53,211,422 $ 41,543,930
Net interest income/interest rate spread (5)
$ 455,308 3.20 % $ 419,565 3.25 % $ 301,744 3.00 %
Tax equivalent adjustment (1,316) (1,405) (718)
Net interest income, as reported $ 453,992 $ 418,160 $ 301,026
Net interest margin (6)
3.59 % 3.42 % 3.14 %
Tax equivalent effect 0.01 0.01 0.01
Net interest margin on a fully tax equivalent basis (6)
3.60 % 3.43 % 3.15 %


	Three Months Ended
	June 30, 2023						March 31, 2023						June 30, 2022
	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
	($ in thousands)
Assets
Interest earning assets:
Loans (1)(2)	$	49,457,937	$	715,195	5.78	%	$	47,859,371	$	655,250	5.48	%	$	42,517,287	$	415,602	3.91	%
Taxable investments (3)	5,065,812		39,436		3.11		5,033,134		37,474		2.98		4,912,994		30,610		2.49
Tax-exempt investments (1)(3)	629,342		7,062		4.49		623,145		6,739		4.33		684,471		6,571		3.84
Interest bearing deposits with banks	2,198,717		27,276		4.96		1,847,140		22,205		4.81		776,478		1,569		0.81
Total interest earning assets	57,351,808		788,969		5.50		55,362,790		721,668		5.21		48,891,230		454,352		3.72
Allowance for credit losses	(446,098)						(466,837)						(428,193)
Cash and due from banks	415,075						445,005						426,187
Other assets	4,709,061						4,702,376						4,362,789
Unrealized gains on securities available for sale, net	(152,382)						(176,332)						(40,591)
Total assets	$	61,877,464					$	59,867,002					$	53,211,422
Liabilities and shareholders’ equity
Interest bearing liabilities:
Savings, NOW and money market deposits	$	22,512,128	$	164,843	2.93	%	$	23,389,569	$	150,766	2.58	%	$	23,027,347	$	17,122	0.30	%
Time deposits	12,195,479		125,764		4.12		9,738,608		80,298		3.30		3,601,088		3,269		0.36
Total interest bearing deposits	34,707,607		290,607		3.35		33,128,177		231,064		2.79		26,628,435		20,391		0.31
Short-term borrowings	3,878,457		50,207		5.18		2,803,743		33,948		4.84		1,603,198		4,083		1.02
Long-term borrowings (4)	2,339,727		26,880		4.60		1,686,830		19,198		4.55		1,462,638		10,313		2.82
Total interest bearing liabilities	40,925,791		367,694		3.59		37,618,750		284,210		3.02		29,694,271		34,787		0.47
Non-interest bearing deposits	12,756,862						14,024,742						16,267,946
Other liabilities	1,648,359						1,783,295						1,010,220
Shareholders’ equity	6,546,452						6,440,215						6,238,985
Total liabilities and shareholders’ equity	$	61,877,464					$	59,867,002					$	53,211,422
Net interest income/interest rate spread (5)			$	421,275	1.91	%			$	437,458	2.19	%			$	419,565	3.25	%
Tax equivalent adjustment			(1,510)						(1,438)						(1,405)
Net interest income, as reported			$	419,765					$	436,020					$	418,160
Net interest margin (6)					2.93	%					3.15	%					3.42	%
Tax equivalent effect					0.01						0.01						0.01
Net interest margin on a fully tax equivalent basis (6)					2.94	%					3.16	%					3.43	%

6259

The following table reflects the components of net interest income for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Nine Months Ended													Six Months Ended
		September 30, 2022						September 30, 2021							June 30, 2023						June 30, 2022
		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)	$	40,529,794	$	1,229,536	4.04	%	$	32,641,362	$	938,323	3.83	%	Loans (1)(2)	$	48,663,070	$	1,370,446	5.63	%	$	38,592,151	$	732,991	3.80	%
Taxable investments (3)	Taxable investments (3)	4,525,323		81,906		2.41	%	3,191,930		45,717		1.91		Taxable investments (3)	5,049,563		76,910		3.05		4,377,990		50,725		2.32
Tax-exempt investments (1)(3)	Tax-exempt investments (1)(3)	574,699		16,079		3.73	%	480,599		11,621		3.22		Tax-exempt investments (1)(3)	626,261		13,800		4.41		543,646		9,757		3.59
Interest bearing deposits with banks	Interest bearing deposits with banks	975,601		6,026		0.82	%	1,588,656		1,101		0.09		Interest bearing deposits with banks	2,023,900		49,481		4.89		1,096,181		2,030		0.37
Total interest earning assets	Total interest earning assets	46,605,417		1,333,547		3.82	%	37,902,547		996,762		3.51		Total interest earning assets	56,362,794		1,510,637		5.36		44,609,968		795,503		3.57
Allowance for credit losses	Allowance for credit losses	(428,078)						(348,011)						Allowance for credit losses	(456,410)						(398,258)
Cash and due from banks	Cash and due from banks	378,819						263,910						Cash and due from banks	429,957						354,433
Other assets	Other assets	4,078,903						3,290,439						Other assets	4,705,742						3,864,997
Unrealized gains on securities available for sale, net	Unrealized gains on securities available for sale, net	(47,051)						35,490						Unrealized gains on securities available for sale, net	(164,291)						(13,671)
Total assets	Total assets	$	50,588,010					$	41,144,375					Total assets	$	60,877,792					$	48,417,469
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	$	22,374,949	$	77,423	0.46	%	17,730,438		32,896		0.25	%	Savings, NOW and money market deposits	$	22,948,425	$	315,608	2.75	%	$	21,781,907	$	26,749	0.25	%
Time deposits	Time deposits	4,122,169		21,274		0.69		4,853,891		21,766		0.60		Time deposits	10,973,830		206,062		3.76		3,577,933		6,100		0.34
Total interest bearing deposits	Total interest bearing deposits	26,497,118		98,697		0.50		22,584,329		54,662		0.32		Total interest bearing deposits	33,922,255		521,670		3.08		25,359,840		32,849		0.26
Short-term borrowings	Short-term borrowings	1,072,791		10,049		1.25		966,544		4,390		0.61		Short-term borrowings	3,344,069		84,156		5.03		1,101,535		4,889		0.89
Long-term borrowings (4)	Long-term borrowings (4)	1,472,344		31,566		2.86		2,037,312		40,595		2.66		Long-term borrowings (4)	2,015,081		46,078		4.57		1,469,515		19,838		2.70
Total interest bearing liabilities	Total interest bearing liabilities	29,042,253		140,312		0.64		25,588,185		99,647		0.52		Total interest bearing liabilities	39,281,405		651,904		3.32		27,930,890		57,576		0.41
Non-interest bearing deposits	Non-interest bearing deposits	14,679,354						10,147,130						Non-interest bearing deposits	13,387,299						13,989,897
Other liabilities	Other liabilities	996,667						690,100						Other liabilities	1,715,461						823,668
Shareholders’ equity	Shareholders’ equity	5,869,736						4,718,960						Shareholders’ equity	6,493,627						5,673,014
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	50,588,010					$	41,144,375					Total liabilities and shareholders’ equity	$	60,877,792					$	48,417,469
Net interest income/interest rate spread (5)	Net interest income/interest rate spread (5)			$	1,193,235	3.18	%			$	897,115	2.99	%	Net interest income/interest rate spread (5)			$	858,733	2.04	%			$	737,927	3.16	%
Tax equivalent adjustment	Tax equivalent adjustment			(3,414)						(2,515)				Tax equivalent adjustment			(2,948)						(2,098)
Net interest income, as reported	Net interest income, as reported			$	1,189,821					$	894,600			Net interest income, as reported			$	855,785					$	735,829
Net interest margin (6)	Net interest margin (6)					3.40	%					3.15	%	Net interest margin (6)					3.04	%					3.30	%
Tax equivalent effect	Tax equivalent effect					0.01						0.01		Tax equivalent effect					0.01						0.01
Net interest margin on a fully tax equivalent basis (6)	Net interest margin on a fully tax equivalent basis (6)					3.41	%					3.16	%	Net interest margin on a fully tax equivalent basis (6)					3.05	%					3.31	%

_____________

(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.

6360

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 June 30, 2023 Compared to June 30, 2022						Six Months Ended June 30, 2023 Compared to June 30, 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		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*	$	76,106	$	223,487	$	299,593	$	223,680	$	413,775	$	637,455
Taxable investments	Taxable investments	8,660		6,546		15,206		22,185		14,004		36,189		Taxable investments	978		7,848		8,826		8,583		17,602		26,185
Tax-exempt investments*	Tax-exempt investments*	1,891		1,308		3,199		2,474		1,984		4,458		Tax-exempt investments*	(558)		1,049		491		1,618		2,425		4,043
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	6,755		18,952		25,707		3,078		44,373		47,451
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	83,281		251,336		334,617		236,959		478,175		715,134
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	(392)		148,113		147,721		1,509		287,350		288,859
Time deposits	Time deposits	1,392		9,388		10,780		(3,529)		3,037		(492)		Time deposits	22,935		99,560		122,495		34,214		165,748		199,962
Short-term borrowings	Short-term borrowings	309		3,387		3,696		531		5,128		5,659		Short-term borrowings	11,897		34,227		46,124		24,064		55,203		79,267
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	8,083		8,484		16,567		9,146		17,094		26,240
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	42,523		290,384		332,907		68,933		525,395		594,328
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	$	40,758	$	(39,048)	$	1,710	$	168,026	$	(47,220)	$	120,806

*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~~$1.5 million and ~~$37.2~~$16.6 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, 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~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(in thousands)
Wealth management and trust fees	$	11,176	$	9,577	$	20,763	$	14,708
Insurance commissions	3,139		3,463		5,559		5,322
Capital markets	16,967		14,711		27,859		29,071
Service charges on deposit accounts	10,542		10,067		21,018		16,279
Gains (losses) on securities transactions, net	217		(309)		595		(1,381)

Fees from loan servicing	2,702		2,717		5,373		5,498
Gains on sales of loans, net	1,240		3,602		1,729		4,588

Bank owned life insurance	2,443		2,113		5,027		4,159
Other	11,649		12,592		26,451		19,559
Total non-interest income	$	60,075	$	58,533	$	114,374	$	97,803

Wealth management and trust fees income increased ~~by $5.7~~$1.6 million and ~~$13.6~~$6.1 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to the same periods in ~~2021 mostly due~~2022. The increase as compared to ~~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 fees totaled $3.9 million and $9.3 million for the three and nine months ended September 30,~~second quarter 2022 ~~respectively. The increases in both 2022 periods were also~~ ~~supplemented~~was mainly driven by ~~additional~~higher revenues generated by our advisory firm, Dudley Ventures, LLC, specializing in the investment and management of tax credit ~~investments, which we~~investments. The increase for the six months ended June 30, 2023 was largely related to higher brokerage fees related to our broker dealer subsidiary, Valley Financial Management, Inc., acquired ~~in October 2021.~~

~~Insurance commissions increased $2.1~~on April 1, 2022 from Bank Leumi USA. Brokerage fees totaled $9.7 million and ~~$3.3~~$4.9 million for the six months ended June 30, 2023 and 2022, respectively.

Capital markets income increased $2.3 million and decreased $1.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to the same periods in ~~2021 mostly~~2022 mainly due to ~~stronger business volumes generated by the Bank's insurance agency subsidiary.~~changes in volume of interest rate swap transactions executed for commercial loan customers.

Service charges on deposit accounts increased ~~by $4.9~~$4.7 million for the six months ended June 30, 2023compared to the same period in 2022 largely due to the additional deposit accounts acquired from Bank Leumi USA on April 1, 2022.

Net gains on sales of loans decreased $2.4 million and ~~$11.0~~$2.9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, 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 continued to retain a higher percentage of new loan volumes during the first half of 2023. During the six months ended June 30, 2023, we sold ~~approximately~~ ~~$48.4~~$71.8 million of residential mortgage loans as 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~~$326.2 million for ~~the nine months ended~~ ~~September 30, 2022~~ ~~and2021, respectively. Our ability to generate net gains on sales of loans could continue to be challenged by a number of factors, including increases~~same period 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.2022.

Other non-interest income increased ~~$7.1 million and $27.5~~$6.9 million for the ~~three and nine~~six months ended ~~September~~June 30, ~~2022~~ 2023 as compared to the same ~~periods~~period in ~~2021, respectively, partially~~2022. The increase for the six months ended June 30, 2023 was mostly due to ~~higher fee~~incremental increases in several operating non-interest income ~~from derivative interest rate swaps executed with commercial lending customers~~categories caused by ~~a greater volume~~the acquisition of ~~transactions~~Bank Leumi USA and ~~higher foreign exchange fees. Swap fee income totaled $10.7 million and $8.8 million for~~organic growth of our business operations over the ~~three months ended~~ ~~September 30, 2022 and~~ ~~2021, respectively, and $35.8 million and $22.6 million for the nine months ended September 30, 2022 and~~2021, respectively. While we believe our commercial loan swap based product will remain attractive to borrowers in 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 excha~~nge 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.

6562

Non-Interest Expense

Non-interest expense ~~increased $86.7~~decreased $16.8 million and ~~$251.7~~increased $58.1 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, respectively, as compared to the same periods in ~~2021, respectively.~~2022. The following table presents the components of non-interest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		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	$	149,594	$	154,798	$	294,580	$	262,531
Net occupancy expense	Net occupancy expense	26,486		19,941		70,906		59,171		Net occupancy expense	25,949		22,429		49,205		44,420
Technology, furniture and equipment expense	Technology, furniture and equipment expense	39,365		21,007		115,245		64,956		Technology, furniture and equipment expense	32,476		49,866		68,984		75,880
FDIC insurance assessment	FDIC insurance assessment	6,500		3,644		16,009		10,294		FDIC insurance assessment	10,426		5,351		19,581		9,509
Amortization of other intangible assets	Amortization of other intangible assets	11,088		5,298		26,925		16,753		Amortization of other intangible assets	9,812		11,400		20,331		15,837
Professional and legal fees	Professional and legal fees	17,840		13,492		62,998		27,250		Professional and legal fees	21,406		30,409		38,220		45,158
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	5,018		3,193		9,271		6,089
Other	Other	22,683		14,469		60,329		38,213		Other	28,290		22,284		54,965		37,646
Total non-interest expense	Total non-interest expense	$	261,639	$	174,922	$	758,709	$	507,028	Total non-interest expense	$	282,971	$	299,730	$	555,137	$	497,070

Salary and employee benefits expense ~~increased $40.6~~decreased $5.2 million and ~~$123.9~~increased $32.0 million for the three and ~~nine~~six months ended ~~September~~June 30, 2023, respectively, as compared to the same periods in 2022. As compared to second quarter 2022, the decline was largely due to decreases in cash incentive compensation expense and Bank Leumi USA merger related costs (which totaled $28.0 million in the second quarter 2022), partially offset by higher salary expense and a restructuring charge of $11.2 million, consisting of severance expense related to recent workforce reductions. The increase for the six months ended June 30, 2023 was primarily driven by higher headcount from the Bank Leumi USA acquisition and organic growth in our operations, the aforementioned restructuring charge, and inflationary pressures on our overall labor costs. These increases were partially offset by lower cash incentive compensation expense and merger related costs. The merger related costs totaled $4.1 million for the six months ended June 30, 2023 as compared to $28.0 million for the same period in 2022.

Net occupancy expense increased $3.5 million and $4.8 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022 mainly driven by increased lease expense.

Technology, furniture and equipment expense decreased $17.4 million and $6.9 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods in 2022. The second quarter 2023 decrease was largely due to Bank Leumi USA merger related expenses (largely consisting of technology related costs) totaling $15.3 million for the second quarter 2022. The decrease for the six months ended June 30, 2023 was mainly due to decline in merger related expense, partially offset by higher depreciation expense as compared to the same period in 2022.

FDIC insurance assessment expense increased $5.1 million and $10.1 million for the three and six months ended June 30, 2023, respectively, as compared to the same periods of ~~2021. 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,~~growth in our balance sheet, as well as ~~$1.5 million of merger related expense~~a two basis point increase in the initial base rate effective 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 are 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 the three and nine months ended September 30, 2022, respectively.

~~FDIC insurance assessment expense increased $2.9 million and $5.7 million for the three and nine months ended September 30, 2022, respectively, as compared to~~ ~~the same periods of 2021 mainly due to the Bank Leumi USA acquisition, as well as our balance sheet organic growth.~~2023.

Amortization of other intangible assets increased ~~$5.8 million and $10.2~~$4.5 million for the ~~three and nine~~six months ended ~~September~~June 30, ~~2022~~2023 ~~, respectively,~~as compared to the same period ~~of 2021 mostly~~in 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~~decreased $9.0 million and ~~$35.7~~$6.9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to the same periods ~~of 2021. The increases were primarily~~in 2022, largely due to declines in merger related expense, partially offset by higher technology transformation consulting and managed services. Within the category, merger

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~~higher consulting expense mainly~~ related expenses (related to ~~technology transformation~~the Bank Leumi USA acquisition) totaled $11.4 million and ~~new product initiatives, and increased managed services. Within this expense category, merger related costs totaled $75 thousand and $11.5~~$12.2 million for the three and ~~nine~~six months ended ~~September~~June 30, 2023 and 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 quarter 2021.~~

Other non-interest expense increased ~~$8.2~~$6.0 million and ~~$22.1~~$17.3 million forfor the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to the same periods ~~of 2021. These~~in 2022 primarily due to general increases ~~within this expense category mostly~~in several categories caused by our acquired and organic growth in operations, higher charitable contributions, and increased charges related to ~~incrementally higher~~collateral liabilities in connection with derivative transactions.

We continuously monitor and closely manage our non-interest expense in an effort to optimize our operating ~~expenses due~~efficiency. To offset the current headwinds impacting our net interest income and margin, we began the implementation of a new cost saving initiative in late June 2023. The identified cost savings are expected to primarily come from workforce reductions, more efficient third-party consulting and service usage, and specific technology cost reductions. As noted above, we incurred $11.2 million of severance expense associated with these efforts during the ~~expansion~~second quarter 2023. Overall, the new initiative is expected to generate more than $40 million of ~~our operations, including acquisitions of Bank Leumi USA~~annual pre-tax cost savings and ~~Westchester. In addition,~~be realized over the ~~2022 periods included a $2.0 million contribution to the Valley Bank Charitable Fund.~~next 12 months.

Income Taxes

Income tax expense totaled ~~$68.4 millionfor the third quarter 2022 as compared to $36.6 million and $42.4~~$51.8 million for the second quarter ~~2022~~2023 as compared to $57.2 million and ~~third~~$36.6 million for the first quarter ~~2021,~~2023 and second quarter 2022, respectively. Our effective tax rate was ~~27.7~~27.1 percent, ~~27.5~~28.1 percent and ~~25.7~~27.5 percent for the ~~third~~second quarter ~~2022,~~2023, first quarter 2023 and second quarter 2022, ~~and third quarter 2021,~~ respectively. The ~~increase~~decline in the effective tax rate in the second quarter 2023 ~~third quarter 2022 as compared~~was primarily due to the ~~third quarter 2021 was partly due~~release of a state valuation allowance related to ~~a $3.8 million excess stock compensation benefit recognized in the 2021 period.~~New Jersey net operating loss carryforwards.

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 2022,~~ Valley ~~operated as four reportable segments: Consumer Lending, Commercial Lending, Investment Management, and Corporate and Other Adjustments. Valley re-evaluated~~manages 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 half of 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. The financial reporting for each segment contains allocations and reporting in line with Valley’s operations, which may not necessarily be comparable to those of any other financial institution. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data. The prior-period balances reflect reclassifications to conform the presentation in those periods to the current operating segment structure. Valley's consolidated results were not impacted by the changes discussed above and remain unchanged for all periods presented.

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


		Three Months Ended September 30, 2022													Three Months Ended June 30, 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	$	8,307,993		$	36,033,901		$	6,189,348		$	50,531,242		Average interest earning assets	$	8,904,483		$	40,553,454		$	7,893,871		$	57,351,808
Income before income taxes		20,137			255,802			(29,415)			246,524
Income (loss) before income taxes														Income (loss) before income taxes	12,200			247,459			(68,840)			190,819
Annualized return on average interest earning assets (before tax)	Annualized return on average interest earning assets (before tax)	0.97		%	2.84		%	(1.90)		%	1.95		%	Annualized return on average interest earning assets (before tax)	0.55		%	2.44		%	(3.49)		%	1.33		%


		Three Months Ended September 30, 2021													Three Months Ended June 30, 2022
		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	$	7,967,305		$	34,549,982		$	6,373,943		$	48,891,230
Income (loss) before income taxes	Income (loss) before income taxes	37,132			141,927			(14,055)			165,004			Income (loss) before income taxes	13,678			127,007			(7,720)			132,965
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)	0.69		%	1.47		%	(0.48)		%	1.09		%

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

Consumer ~~Lending~~Banking

Consumer ~~Lending~~Banking represented ~~18.7~~18.0 percent of our loan portfolio at ~~September~~June 30, ~~2022,~~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~~11.1 percentof our loan portfolio at ~~September~~June 30, ~~2022)~~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 3.3 percent of total loans at ~~September~~June 30, ~~2022)~~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~~$937.2 million to ~~$8.3~~$8.9 billion for the three months ended ~~September~~June 30, ~~2022~~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~~$1.5 millionto ~~$20.1~~$12.2 millionfor the ~~third~~second quarter ~~2022~~2023 as compared to the ~~third~~second quarter ~~2021 largely~~2022 mainly driven by lower net interest income and, to a lesser extent, an increase in non-interest expense. Net interest income decreased $23.0 million in the second quarter 2023 as compared to the same period of 2022 due to ~~a $11.8 million~~additional interest expense generated from higher average deposit and other borrowing balances, as well as an increase in the ~~provision for loan losses, a $5.6 million increase in the internal transfer expense and higher non-interest expense. The higher internal transfer expense and non-interest expense was mostly driven by~~cost of such interest bearing liabilities ~~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~~an increase in non-interest income ~~for the third quarter 2022 as compared to the third quarter 2021 largely~~and lower internal transfer expense. Non-interest income increased $8.4 million mainly due to increases in wealth management and trust fees, capital markets and service charges on deposit accounts, ~~and brokerage fees within wealth management and trust fees,~~ partially ooffset by lower gains on sales of loans.~~ffset by~~Internal transfer expense decreased $15.6 million for the second quarter 2023 as compared to the second quarter 2022 due to the lower allocation of non-interest expense over the same period. The provision for loan losses decreased $1.9 million for the three months ended June 30, 2023 due to a decrease in non-economic qualitative factors as compared to one year ago. See further details in the “Allowance for Credit Losses” section of this MD&A.

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~~lower gains on sales of residential mortgage~~ ~~loans. The net interest income also increased by a $3.4 million in the third quarter 2022 as compared to the same quarter in the prior year, mainly driven by higher~~ ~~average loan balances.~~

~~The net~~Net interest margin on the Consumer ~~Lending~~Banking portfolio decreased 16134 basis points to ~~2.81~~1.60 percent for the ~~third~~second quarter ~~2022~~2023 as compared to the ~~third~~second quarter ~~2021~~2022 mainly due to a 37224 basis point increase in the costs associated with our funding sources, partially offset by a 2190 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 brokered~~rates on most of our interest bearing commercial and retail deposit products, increased utilization of fully FDIC-insured indirect customer 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~~second quarter ~~2022~~2023. The 2190 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 0.55 percent for the second quarter 2023 compared to 0.69 percent for the second 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~~$9.3 billionand represented ~~19.2~~18.6 percent of the total loan portfolio at ~~September~~June 30, ~~2022.~~2023. Commercial real estate loans and construction loans totaled ~~$28.1~~$31.6 billion and represented ~~62.1~~63.4 percentof the total loan portfolio at ~~September~~June 30, ~~2022.~~2023.

Average interest earning assets in ~~this segment~~Commercial Banking increased~~approximately$10.7~~ $6.0 billion to ~~$36.0~~$40.6 billion for the three months ended ~~September~~June 30, ~~2022~~2023 as compared to the ~~third~~second quarter ~~2021 mostly~~2022 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 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.

Income before income taxes for Commercial Banking increased $120.5 million to $247.5 million for the three months ended ~~September~~June 30, ~~2022 for Commercial Lending increased $113.9 millionto $255.8 million~~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~~decreases in the provision for credit losses and ~~lower~~ ~~provision for~~ ~~loan losses,~~internal transfer expense, partially offset by ~~an increase in the internal~~ ~~transfer~~higher non-interest expense. Net interest income for this segment increased ~~$135.6~~$41.0 million to ~~$372.6~~$373.7 million for the ~~third~~second 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 increased $11.9~~higher interest rates on new and adjustable loans. Internal transfer expense decreased $55.0 million to ~~$23.5~~$102.4 million for the three months ended ~~September~~June 30, 2022 as compared to the third quarter 2021. The increase was mostly due to general increases 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. ~~The provision for loan losses decreased by $13.5 million~~2023 as compared to the second quarter ~~2021.~~2022. The provision for credit losses decreased $35.5 million to $2.8 million as compared to the same period in 2022 mainly due to elevated provision for credit losses for the second quarter 2022 related to non-PCD loans and unfunded credit commitments acquired from Bank Leumi USA. See details in the "Allowance for Credit Losses for Loans" section of this MD&A. ~~Internal transfer~~Non-interest expense increased ~~$42.8~~$10.9 million to $35.4 million for ~~the third quarter 2022~~three months ended June 30, 2023 as compared to the ~~third~~second quarter ~~2021 due to general increases related to both organic and acquired growth in our business.~~2022.

The net interest margin for this segment ~~increased 40~~decreased 16 basis ~~points~~points to ~~4.14~~3.69 percent for the ~~third~~second quarter ~~2022~~2023 as compared to the ~~third~~second quarter ~~2021~~2022 due to a ~~77 basis point increase in the yield on average loans, partially offset by a 37~~224 basis point increase in the cost of our funding ~~sources.~~sources, partially offset by a 208 basis point increase in the yield on average loans.

The return on average interest earning assets before income taxes for the commercial banking segment was 2.44 percent for the three months ended June 30, 2023 compared to 1.47 percent for 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 interest 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~~$1.5 billion to $7.9 billion for the three months ended ~~September~~June 30, ~~2022~~2023 mainly due to ana $1.4 billion increase ~~of $1.5 billion~~ in average ~~taxable investment securities,~~ ~~partially offset by lower average~~overnight 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.~~ ~~Average interest bearing deposits with~~ banks ~~decreased $1.2 billion~~ as compared to the same period in ~~2021 mainly~~ ~~due to continued funding of loan growth, fluctuations~~2022. Our average overnight cash levels increased in the ~~timing of loan~~second quarter2023 as a cautionary liquidity management measure resulting from the bank failures in March and ~~investment activity and surge deposits from customers that drove higher levels of excess liquidity in the third quarter 2021.~~April 2023.

~~The pre-tax loss for this segment totaled $29.4 million for~~For the three months ended ~~September~~June 30, ~~2022 as~~2023, loss before income taxes in this segment totaled $68.8 million compared to ~~a $14.1~~$7.7 million for the same period in ~~2021.~~2022. The ~~$15.4~~$61.1 million increase in the pre-tax loss during the ~~2022~~second quarter 2023 period was mainly due to ~~increases in non-interest expense that were~~lower internal transfer income and net interest income, partially offset by ~~an increase~~a decrease in non-interest expense. The internal transfer ~~income. Non-interest expense increased $71.6~~income decreased $70.6 million to ~~$205.5~~$124.4 million ~~during~~for the three months ended ~~September~~June 30, ~~2022~~2023 as compared to the same period a year ago ~~largely~~ due to ~~increases~~the lower allocation of non-interest expense over the same period. Non-interest expense decreased $32.1 million to $224.4 million during the three months ended June 30, 2023 as compared to the same period in ~~technology, furniture and equipment, and occupancy expense, as well as higher salaries and employee benefit~~2022 mainly attributable to merger expenses incurred during the ~~third~~second quarter 2022 ~~and our expanded banking operations~~ resulting from the Bank Leumi USA ~~acquisition~~. acquisition. 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 million to $140.2 million for the three months ended September 30, 2022 as compared to the same period a year ago mostly due to general increases related to our growth and recent acquisitions.

The net interest margin for this segment ~~increased 88~~decreased 93 basis points to ~~2.01~~1.19 percent for the ~~for the third~~second quarter ~~2022~~2023 as compared to the ~~third~~second quarter ~~2021~~2022 due to a ~~125~~224 basis point increase in cost of our funding sources, partially offset by a 131 basis point increase in the yield on average ~~investments, partially offset by a~~ 37 ~~basis point increase in cost of our funding sources.~~investments. The increase in the yield on average investments as compared to the ~~third quarter 2021~~same period a year ago was largely ~~due to investment maturities and prepayments redeployed into~~driven by new higher yielding ~~securities, as well as lower~~investments and a reduction in premium amortization expense mostly caused by ~~a decline~~slower principal repayments in ~~prepayments on mortgage-backed securities during~~ the ~~third quarter 2022~~.

rising interest rate environment.

The following tables present the financial data for Valley's operating ~~segment~~segments for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:


		Nine Months Ended September 30, 2022													Six Months Ended June 30, 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	$	7,978,732		$	32,551,062		$	6,075,623		$	46,605,417		Average interest earning assets	$	8,836,859		$	39,826,630		$	7,699,305		$	56,362,794
Income before income taxes	Income before income taxes	56,796			519,640			(40,905)			535,531			Income before income taxes	13,224			471,069			(89,758)			394,535
Annualized return on average interest earning assets (before tax)	Annualized return on average interest earning assets (before tax)	0.95		%	2.13		%	(0.90)		%	1.53		%	Annualized return on average interest earning assets (before tax)	0.30		%	2.37		%	(2.33)		%	1.40		%


	Six Months Ended June 30, 2022
	Consumer Banking			Commercial Banking			Treasury and Corporate Other			Total
	($ in thousands)
Average interest earning assets	$	7,848,764		$	30,743,387		$	6,017,817		$	44,609,968
Income (loss) before income taxes	36,659			263,838			(11,490)			289,007
Annualized return on average interest earning assets (before tax)	0.93		%	1.72		%	(0.38)		%	1.30		%

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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 Banking

Consumer ~~Lending~~

~~Consumer Lending's~~Banking's average interest earning assets increased ~~$802.6~~$988.1 million to ~~$8.0~~$8.8 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to the same period in ~~2021.~~2022. 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~~home equity loans and secured personal lines of credit.

Income before income taxes generated by Consumer ~~Lending~~Banking decreased ~~$47.5~~$23.4 million to ~~$56.8~~$13.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to the same period in ~~2021 largely due~~2022 mainly driven by lower net interest income, and, to a ~~$32.5 million increase~~lesser extent, increases in ~~the internal transfer~~non-interest expense ~~coupled with a higher~~and the provision for loan ~~losses and~~losses. Net interest income decreased $37.0 million for the six months ended June 30, 2023 as compared to the same period in 2022 mainly due to additional interest expense generated from higher ~~non-interest expense.~~ average deposit balances, as well as an increase in interest rates on such balances. The provision for loan losses increased ~~$21.0~~$2.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022 from $6.5 million credit (negative) provision for the same period of 2021. The increase in provision was mainly~~ 2023 due to ~~higher~~additional reserves related to residential loan ~~growth.~~growth, and changes in the economic forecast component within our CECL model as compared to one year ago. See further details in the ~~"Allowance~~“Allowance for Credit ~~Losses"~~Losses” section of this MD&A. ~~Net interest~~The negative impact of these items was partially offset by an $8.9 million increase in non-interest income ~~increased $9.5~~coupled with a $13.4 million ~~primarily due~~decrease in the internal transfer expense for the six months ended June 30, 2023 as compared to ~~additional~~the same period in 2022. The increase in non-interest income ~~generated on higher average loan balances. Non-interest income also increased $3.1 million mostly due to~~was mainly driven by 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.accounts.

Net interest margin on the Consumer ~~Lending~~Banking portfolio decreased 15116 basis points to ~~2.89~~1.76 percent for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 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~~202 basis point increase in the costs associated with our funding ~~sources. The 10~~sources, partially offset by an 86 basis point ~~decrease~~increase in the yield on average loans. The 86 basis point increase in loan yield was largely due to ~~lower~~higher yielding new loan volumes ~~prior~~and adjustable rate loans 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 0.30 percent for the six months ended June 30, 2023 compared to 0.93 percent as compared to the ~~second quarter 2022 and normal loan repayments. The increase in our funding costs was mainly~~ same period one year ago~~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~~Banking

Average interest earning assets in Commercial ~~Lending~~Banking increased ~~$7.1~~$9.1 billion to ~~$32.6~~$39.8 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to the same period in ~~2021.~~2022. This increase was primarily due to strong organic loan growth, especially in the commercial real estate portfolio over the 12-month period ended ~~September~~June 30, ~~2022,~~2023, as well as loans acquired from Bank Leumi USA ~~and Westchester.~~on April 1, 2022.

For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, income before income taxes for Commercial ~~Lending~~Banking increased ~~$107.9~~$207.2 million to ~~$519.6~~$471.1 million as compared to the same period in ~~2021~~2022 mainly ~~driven by increases~~due to an increase in net interest income and ~~non-interest income,~~a lower provision for credit losses, partially offset by higher i~~nternal transfer expense and~~ ~~provision for loan losses.~~non-interest expense. Net interest income increased ~~$248.3~~$172.6 million to ~~$951.9~~$751.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to the same period in ~~2021 mainly~~2022 primarily due to higher average commercial loan balances and ~~loan yield during the 2022 period.~~ higher interest rates on new and adjustable loans.~~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~~. The provision for credit losses ~~increased $6.8~~decreased $34.1 million to ~~$34.6~~$5.8 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~$27.8~~$39.9 million for the same period in ~~2021~~2022 mainly due to ~~the~~a provision ~~related to~~for non-PCD loans and unfunded credit commitments acquired from Bank Leumi ~~USA on April 1,~~in the second quarter 2022. See details in the "Allowance for Credit Losses for Loans" section ~~below~~of this MD&A. Non-interest expense increased $21.6 million to $71.1 million for the six months ended June 30, 2023 as compared to the same period in 2022 mainly due to acquired and organic growth in our commercial operations. See further ~~details.~~ details in the "Non-Interest Income" and "Non-Interest Expense" sections of this MD&A.

The net interest margin for this segment increased 221 basis ~~points~~point to ~~3.90~~3.78 percent for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to the same period in ~~2021~~2022 due to a 27203 basis point increase in yield on average loans, partially offset by a 5202 basis point increase in the cost of our funding sources.

The return on average interest earning assets before income taxes for the commercial banking segment was 2.37 percent for the six months ended June 30, 2023 compared to 1.72 percent for the same period in 2022.

Treasury and Corporate Other

Treasury and Corporate Other's average interest earning assets increased ~~$814.4 million~~$1.7 billion during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 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~~2022 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~~USA, as well as other select new investment securities purchases over the last 12-month period ~~and a reduction in the impact of surge customer~~. Average interest bearing deposits with banks increased $47.5 million as compared to the ~~2021 period.~~same period in 2022 due to additional cash held as a cautionary liquidity management measur

e starting in March 2023 and through most of the second quarter 2023.

The ~~pre-tax~~ loss before income taxes for this segment totaled ~~$40.9~~$89.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~$32.6~~$11.5 million for the same period in ~~2021.~~2022. The ~~$8.3~~$78.3 million increase in pre-tax loss was mainly due to an increase in non-interest expense ~~largely~~and decreases in both net interest income and internal transfer income, partially offset by higher ~~in internal transfer income and net interest~~non-interest income. Non-interest expense increased ~~$244.1~~$30.4 million to ~~$617.7~~$442.6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to the same period in ~~2021 partially~~2022 largely 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,~~growth including higher salary and employee benefits expense, technology, furniture and equipment and professional and legal fees. Internal transfer income decreased $36.7 million to $286.9 million for the ~~comparative 2021~~six months ended June 30, 2023 as compared to the same period ~~also included an $8.4~~in 2022 due to the higher allocation of non-interest expense over the same period. Non-interest income increased $8.9 million ~~pre-tax~~ l~~oss on extinguishment~~ during the six months ended June 30, 2023 as compared to the same period in 2022 mostly due to incremental increases in several operating non-interest income categories caused by acquired and organic growth of ~~debt.~~our business operations over the last 12-month period. See further details in the "Non-Interest Income" and "Non-Interest Expense" sections of this MD&A. ~~Internal transfer income~~Provision for credit losses increased ~~$190.8~~$4.4 million ~~to $463.8 million for the nine months ended September 30, 2022 as compared to the same period in 2021~~mainly due to a corporate bond issued by Signature Bank within our AFS debt securities portfolio that was fully charged-off during the ~~higher allocation of non-interest expense over the same period.~~first quarter 2023.

Treasury and Corporate Other's net interest margin ~~increased 74~~decreased 46 basis points to ~~1.87~~1.35 percent for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to the same period in ~~2021~~2022 due to a 79202 basis point increase in cost of our funding sources, partially offset by a 156 basis point increase in the yield on average ~~investments, and a 5 basis point increase in cost of our funding sources.~~investments. The ~~increase in the~~increased yield on average investments as compared to the same period in ~~2021~~2022 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~~June 30, ~~2022.~~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~~June 30, ~~2022.~~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~~June 30, ~~2022.~~2023. Although the size of Valley’s balance sheet is forecasted to remain static as of ~~September~~June 30, ~~2022~~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~~second quarter ~~2022.~~2023. The model also utilizes an immediate parallel shift in market interest rates at ~~September~~June 30, ~~2022.~~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	$	215,671	12.16	%
+200	+200	231,412		11.95		+200	143,021		8.06
+100	+100	117,300		6.06		+100	70,754		3.99
–100	–100	(109,262)		(5.64)		–100	(72,077)		(4.06)
–200	–200	(233,970)		(12.08)		–200	(143,067)		(8.06)
–300	–300	(378,853)		(19.57)		–300	(213,209)		(12.02)

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~~3.99 percent. Management believes the interest rate sensitivity of our balance sheet remains within an acceptable tolerance range at ~~September~~June 30, ~~2022.~~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~~Valley's ability to satisfy its current and future cash flow ~~needs as they become due. A bank’s~~needs. Our objective is to have liquidity ~~reflects its ability~~available to ~~meet~~fulfill loan ~~demand, to accommodate possible outflows in~~demands, repay deposits and other liabilities, and execute balance sheet strategies in all market conditions while adhering to ~~take advantage of interest rate opportunities in~~internal controls and income targets. Valley's liquidity program is managed by the ~~marketplace. Liquidity management is carefully performed~~Treasury Department and routinely ~~reported~~monitored by ~~our Treasury Department to~~the Asset and Liability Management Committee and two board committees. Among other actions, Treasury ~~reviews historical funding requirements, our~~actively monitors Valley's current liquidity ~~position,~~profile, sources and stability of funding, ~~marketability~~availability of assets ~~options~~ for ~~attracting~~pledging or sale, opportunities to gather 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~~measures including ratios of loans to deposits ~~in excess of~~below 110 percent ~~or reliance on~~and wholesale funding ~~greater than~~to total funding below 25 percent, ofas summarized in the table below. Management maintains flexibility to temporarily exceed these thresholds in certain operating environments.

The following table presents Valley's loan to deposits and wholesale funding to total ~~funding. The Bank was in compliance with the foregoing policies~~funding ratios at ~~September~~June 30, ~~2022.~~2023 and December 31, 2022:


	June 30, 2023		December 31, 2022

Loans to deposits	100.5	%	98.5	%
Wholesale funding to total funding	24.8		13.8

Valley's short and long-term cash requirements include contractual obligations under borrowings, deposits, ~~payment~~payments related to leases, capital expenditures and other purchase commitments. In the ordinary course of operations, the Bank also enters into various financial obligations, including contractual obligations that may require future cash payments. Management believes the Bank has the ability to generate and obtain adequate amounts of cash to meet its short-term and long-term obligations as they come due by utilizing various cash resources described below.

On the asset side of the balance sheet, the Bank has numerous sources of liquid funds in the form of cash and due from banks, interest bearing deposits with banks (including the Federal Reserve Bank of New York)~~, investment~~ and other sources. The following table summarizes Valley's sources of liquid assets:


	June 30, 2023		December 31, 2022
	(in thousands)
Cash and due from banks	$	463,318	$	444,325
Interest bearing deposits with banks	1,491,091		503,622
Trading debt securities	3,409		13,438
Held to maturity debt securities (1)	182,280		177,614
Available for sale debt securities (2)	1,236,946		1,261,397
Loans held for sale	33,044		18,118
Total liquid assets	$	3,410,088	$	2,418,514

(1) Represents 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~~ within the held to maturity debt security portfolio.

(2) Includes approximately $847 million 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 approximate~~ly ~~$2.6 billion, representing~~ ~~5.2 percent~~ ~~of earning assets at September 30, 2022 and $3.5 billion, representing 8.7 percent of earning assets at December 31, 2021. Of the~~ ~~$2.6 billion~~ ~~of liquid assets~~ ~~at September 30, 2022, approximately $348~~$333 million of various investment securities that were pledged to counterparties to support our earning asset funding ~~strategies. We anticipate~~strategies at June 30, 2023 and December 31, 2022, respectively.

Total liquid assets represented 6.0 percent and 4.6 percent of earning assets at June 30, 2023 and December 31, 2022, respectively.

Other sources of funds on the ~~receipt of approximately $310 million in principal payments from securities in the total investment portfolio at September 30, 2022 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~~asset side are derived from scheduled loan payments of principal and interest, as well as prepayments received. ~~Loan principal payments~~At June 30, 2023, estimated cash inflows from total loans ~~and loans held for sale at September 30, 2022~~ are projected ~~in accordance with their scheduled contractual terms~~ to be approximately ~~$11.2~~$14.7 billion over the next 12-month period. As a contingency plan for any liquidity constraints, liquidity could also be derived from the sale of conforming residential mortgages from our loan portfolio or alleviated from the temporary curtailment of lending activities. We anticipate the receipt of approximately $386.2 million in principal payments from securities in the total investment portfolio at June 30, 2023 over the next 12-month period due to normally scheduled principal repayments and expected prepayments of certain securities, primarily residential mortgage-backed securities.

On the liability side of the balance sheet, we utilize multiple sources of funds to meet liquidity needs, including retail and commercial deposits, ~~brokered and~~fully FDIC-insured indirect customer deposits, collateralized municipal deposits, and short-term and long-term borrowings. Our core deposit base, which generally excludes all fully insured ~~brokered~~indirect customer deposits, ~~and both~~as well as retail ~~and brokered~~ certificates of deposit over $250 thousand, represents the largest of these ~~sources.~~sources. Average core deposits totaled approximately ~~$37.9~~$42.0 billion and ~~$29.4~~$38.1 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and for the year ended December 31, ~~2021,~~2022, respectively, representing ~~81.4~~74.6 percent and ~~78.3~~79.2 percent of average interest earning assets for the respective periods. The level of interest bearing deposits is affected by interest rates offered, which is often influenced by our need for funds, rates prevailing in the capital markets, competition, and the need to ~~match the maturities of assets and liabilities.~~manage interest rate risk sensitivity.

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 customer deposits, the Bank ~~could borrow approximately $2.1 billion from these banks on a collective basis.~~ has ample access to readily available borrowing sources available to supplement its current and projected funding needs. The ~~Bank is also a member of~~following table presents short-term borrowings outstanding at June 30, 2023 and December 31, 2022:


	June 30, 2023		December 31, 2022
	(in thousands)
FHLB advances	$	1,000,000	$	24,035

Securities sold under agreements to repurchase	88,899		114,694
Total short-term borrowings	$	1,088,899	$	138,729

The following table summarizes the ~~Federal Home Loan Bank of New York (FHLB)~~Bank's estimated unused available non-deposit borrowing capacities at June 30, 2023 and ~~has the ability to borrow from them in the form of~~ December 31, 2022:


	June 30, 2023		December 31, 2022
	(in thousands)
FHLB borrowing capacity*	$	13,093,000	$	6,891,000
Unused FRB discount window*	7,684,000		2,099,000
Unused federal funds lines available from commercial banks	2,065,000		1,940,000
Unencumbered investment securities	1,326,000		3,502,000
Total	$	24,168,000	$	14,432,000

* FHLB ~~advances secured~~and FRB borrowings are collateralized by ~~pledges of~~ certain ~~eligible collateral,~~pledged securities, 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~~on certain real estate and residential mortgage ~~and commercial real estate~~secured loans.

Additionally, ~~Valley's collateral pledged to the FHLB may be used to obtain Municipal Letters of Credit (MULOC) to collateralize certain municipal deposits held by Valley. At September 30, 2022, Valley had $1.6 billion of MULOCs outstanding for this purpose. Furthermore, we can obtain overnight borrowings from~~ the Federal Reserve established the Bank ~~of New York via the discount window~~Term Funding Program on March 12, 2023 as a ~~contingency~~funding source for ~~additional liquidity. At September 30, 2022, our borrowing capacity~~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 ~~Federal Reserve Bank's discount window was $2.1 billion.~~

~~We also have access to other~~Program can be requested until March 11, 2024. This Program is currently another short-term ~~and long-term borrowing sources to support our asset base, such as repos (i.e., securities sold~~liquidity source for Valley. Valley had no outstanding borrowings under ~~agreements to repurchase). Short-term borrowings (consisting of FHLB advances, repos, and from time to time, federal funds purchased) increased approximately $263.6 million to $919.3 million~~the Program at ~~September~~June 30, ~~2022 as compared to December 31, 2021 mainly due a higher utilization of FHLB advances, partially offset by lower repo balances at September 30, 2022.~~2023.

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.~~notes (including $125 million of 5.125 percent subordinated notes which are maturing on September 27, 2023). 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~~June 30, ~~2022,~~2023, we had ~~$43.3~~$61.0 million, ~~$1.3~~$1.2 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 $3.4 million of trading debt securities at June 30, 2023 consisting of 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,~~income, net of applicable taxes.

We have evaluated all available for sale debt securities that are in an unrealized loss position as of ~~September~~June 30, ~~2022~~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 a credit related impairment of one corporate bond issued by Signature Bank resulting in both a provision for credit losses and full charge-off of the security totaling $5.0 million during the six months ended June 30, 2023. There was no other impairment ~~charges~~recognized within the available for sale debt securities portfolio during the three ~~and nine~~ months ended ~~September~~June 30, ~~2022~~2023 and the ~~year~~three and six months ended ~~December 31, 2021. As a result, there~~June 30, 2022.

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 available for sale debt securities were past due as of June 30, 2023 and there was no allowance for credit losses for available for sale debt securities at ~~September~~June 30, ~~2022~~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~~$1.4 million and ~~$1.2~~$1.6 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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.~~

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~~June 30, ~~2022:~~2023:


		September 30, 2022									June 30, 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	$	1,052,295	$	39	$	(124,114)	$	928,220
AA Rated	AA Rated	152,126		—		(38,172)		113,954		AA Rated	149,623		—		(27,011)		122,612
A Rated	A Rated	10,066		15		(984)		9,097		A Rated	17,213		—		(3,000)		14,213
BBB Rated	BBB Rated	84,667		—		(8,132)		76,535		BBB Rated	69,905		—		(8,598)		61,307

Non-investment grade										Non-investment grade	5,000		—		(1,222)		3,778
Not rated	Not rated	101,092		—		(8,213)		92,879		Not rated	120,644		—		(13,828)		106,816
Total	Total	$	1,464,821	$	131	$	(193,098)	$	1,271,854	Total	$	1,414,680	$	39	$	(177,773)	$	1,236,946
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	$	3,333,395	$	918	$	(455,892)	$	2,878,421
AA Rated	AA Rated	252,632		7		(25,167)		227,472		AA Rated	237,338		105		(15,184)		222,259
A Rated	A Rated	9,297		2		(204)		9,095		A Rated	5,898		1		(145)		5,754
BBB Rated	BBB Rated	6,000		—		(317)		5,683		BBB Rated	6,000		—		(780)		5,220
Non-investment grade	Non-investment grade	5,517		—		(1,061)		4,456		Non-investment grade	5,416		—		(872)		4,544
Not rated	Not rated	158,213		17		(10,579)		147,651		Not rated	178,791		1		(16,042)		162,750
Total	Total	$	3,722,020	$	284	$	(535,652)	$	3,186,652	Total	$	3,766,838	$	1,025	$	(488,915)	$	3,278,948
Allowance for credit losses	Allowance for credit losses	1,696		—		—		1,696		Allowance for credit losses	1,351		—		—		1,351
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	$	3,765,487	$	1,025	$	(488,915)	$	3,277,597


*			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~~$120.6 million and $178.8 million, respectively, of investments not rated by the rating agencies with aggregate unrealized losses of ~~$10.6~~$13.8 million and $16.0 million, respectively, at ~~September~~June 30, ~~2022~~2023. The unrealized losses within non-rated available for sale debt securities mostly related to several large corporate bonds negatively impacted by rising interest rates, and not changes in underlying credit. The unrealized losses within non-rated held to maturity debt

securities mostly related to four single-issuer bank trust preferred issuances with a combined amortized cost of ~~$36.0~~$36.1 million and several corporate and other debt securities.

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

Loan Portfolio

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


		September 30, 2022			June 30, 2022			December 31, 2021					June 30, 2023			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	$	9,287,309		$	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	27,793,072			27,051,111			25,732,033
Construction	Construction	3,571,818			3,374,373			1,854,580				Construction	3,815,761			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	31,608,833			30,777,078			29,432,868
Residential mortgage	Residential mortgage	5,177,128			5,005,069			4,545,064				Residential mortgage	5,560,356			5,486,280			5,364,550
Consumer:	Consumer:											Consumer:
Home equity	Home equity	467,135			431,455			400,779				Home equity	535,493			516,592			503,884
Automobile	Automobile	1,711,086			1,673,482			1,570,036				Automobile	1,632,875			1,717,141			1,746,225
Other consumer	Other consumer	1,063,775			1,026,854			1,000,161				Other consumer	1,252,382			1,118,929			1,064,843
Total consumer loans	Total consumer loans	3,241,996			3,131,791			2,970,976				Total consumer loans	3,420,750			3,352,662			3,314,952
Total loans*	Total loans*	$	45,185,764		$	43,560,777		$	34,153,657			Total loans*	$	49,877,248		$	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		%	18.6		%	18.8		%
Commercial real estate	Commercial real estate	62.1			61.8			60.9				Commercial real estate	63.4			63.2			62.7
Residential mortgage	Residential mortgage	11.5			11.5			13.3				Residential mortgage	11.1			11.3			11.4
Consumer loans	Consumer loans	7.2			7.2			8.7				Consumer loans	6.9			6.9			7.1
Total	Total	100.0		%	100.0		%	100.0		%		Total	100.0		%	100.0		%	100.0		%

* Includes net unearned discount and deferred loan fees of ~~$136.5~~$119.1 million, ~~$141.2~~$125.4 million and ~~$78.5~~$120.5 million at ~~September 30, 2022,~~ June 30, ~~2022,~~2023, March 31, 2023 and December 31, ~~2021,~~2022, respectively. ~~The increases from December 31, 2021 were largely 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 organic loan originations and slower paydown activity of existing loans. Commercial and industrial, total commercial real estate (including construction) and residential mortgage~~Total loans increased 9$1.2 billion, or 10.0 percent ~~17 percent and 14 percent, respectively,~~ on an annualized basis ~~during~~to $49.9 billion at June 30, 2023 from March 31, 2023 mainly due to continued organic loan growth in commercial loan categories and relatively low levels of loan prepayment activity during the ~~third~~second quarter ~~2022~~2023. Residential mortgage loans held for sale at fair value totaled $23.0 million and $17.2 million at June 30, 2023 and March 31, 2023, respectively. At June 30, 2023, loans held for sale also included one non-performing construction loan totaling $10.0 million, net of charge-offs, transferred from the loan portfolio during the second quarter 2023.

Commercial and industrial loans increased $~~186.9~~243.4 million to ~~$8.7~~$9.3 billion at ~~September~~June 30, ~~2022~~2023 as compared to ~~June 30, 2022. Excluding PPP loans, the commercial~~March 31, 2023. The organic and ~~industrial loan organic~~diverse growth ~~totaled $237.1 million~~ ~~during the third quarter 2022~~was mainly ~~due to solid organic~~a result of new loan volumes ~~largely amongst~~from our pre-existing long-term customer base across most of our primary market areas. In addition, the new loan pipeline was driven by direct calling 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).~~base.

Commercial real estate loans (excluding construction loans) increased ~~$1.0 billion~~$742.0 million to ~~$24.5~~$27.8 billion at ~~September 30, 2022 from~~ June 30, ~~2022 driven by~~2023 from March 31, 2023 reflecting solid organic growth mainly ~~in the~~within non-owner occupied and ~~multifamily loan portfolios. The new loan volumes were generated~~multi-family loans across ~~most of~~ our geographic ~~footprints.~~ market areas. At June 30, 2023, commercial real estate loans collateralized by office buildings were approximately $3.2 billion of the $27.8 billion portfolio. These loans are geographically disbursed largely across Florida, Alabama, New Jersey, New York, and Manhattan with a combined weighted average loan to value ratio of 52 percent and debt service coverage ratio of 1.78.

Construction loans increased only $~~197.4~~89.8 million to ~~$3.6~~$3.8 billion at ~~September 30, 2022 from~~ June 30, ~~2022 mainly~~2023 from March 31, 2023 and was largely due to ~~a high volume of~~ advances on ~~new, and to a lesser extent,~~ pre-existing construction loan projects ~~during the third quarter 2022.~~in New Jersey, New York and Florida.

Residential mortgage loans increased ~~$172.1~~$74.1 million, or ~~13.8~~5.4 percent on an annualized basis, during the ~~third~~second 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 $188.0 million ~~$342.9 millionfor the third quarter 2022 as compared to $540.7 million and $622.1 million~~ for the second quarter ~~2022~~2023 as compared to

$194.4 million and ~~third~~$540.7 million for the first quarter ~~2021,~~2023 and second quarter 2022, respectively. Florida originations totaled ~~$92.1~~$63.2 million and represented 2733.61 percent of total residential mortgage loan originations in the quarter. During the second quarter 2023, we retained approximately 73.2 percent of the total residential mortgage originations in our held for investment loan portfolio. Of the total originations in the ~~third~~second quarter ~~2022, only $36.7~~2023, $50.4 million of residential mortgage loans were originated for sale rather than held for investment as compared to $61.9 million during the second 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 quarter 2022 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~~applications has remained relatively low in the early stages of the ~~fourth~~third 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~~$18.9 million to ~~$467.1~~$535.5 million at ~~September~~June 30, ~~2022~~2023 compared to ~~June 30, 2022. However,~~March 31, 2023 as a result of lower new ~~home equity loan volumes~~originations and ~~customer usage of existing home equity lines of credit continue to be modest and we anticipate growth~~line utilization in ~~this loan category to be challenged by the~~an unfavorable ~~rising~~high interest rate environment.

Automobile loans ~~increased~~decreased by ~~$37.6~~$84.3 million, or ~~9.0~~19.6 percent on an annualized basis, to ~~$1.7~~$1.6 billion at ~~September~~June 30, ~~2022~~2023 as compared to ~~June 30, 2022 as loan originations volumes~~March 31, 2023 largely due to continued ~~to outpace loan repayments during the~~ ~~third quarter 2022. However, loan originations slowed significantly during the third quarter 2022 as~~low consumer demand for new and used vehicle financing ~~declined due to~~because of the higher interest rate environment. WeDuring the second quarter 2023, the interest rates on new car loans reached the highest level since 2008. We originated ~~$196.6~~$16.2 million in auto loans through our Florida dealership network during the ~~third~~second quarter ~~2022~~2023 as compared to ~~$278.2~~$31.5 million in the ~~second~~first quarter ~~2022.~~2023. Of the total originations, our Florida dealership network ~~contributed $33.7 million in auto loan originations, representing~~represented approximately 1720 percent of new loans, during the ~~third~~second quarter ~~2022.~~2023. Despite ~~increased~~adequate 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~~third quarter ~~2022.~~2023.

Other consumer loans increased ~~$36.9~~$133.5 million to ~~$1.1~~$1.3 billion at ~~September 30, 2022 from~~ June 30, ~~2022.~~2023 as compared to March 31, 2023mainly 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 in new loan originations for the third quarter 2022, we anticipate solid organic commercial and industrial non-PPP and commercial real estate~~Annualized loan growth ~~to continue in the fourth quarter 2022. Based upon current projections, we anticipate a range of 8~~slowed to 10 percent ~~annualized~~during the second quarter 2023 from 16 percent in the first quarter 2023 as we worked through the majority of the strong loan ~~growth for~~pipeline that was present at the fourth quarter 2022. However, there can be no assurance that those positive trends will continue, or balances will not decline from September 30, 2022 due to several factors, including, but not limited to persistently high inflation, the Federal Reserve's rapid monetary policy tightening, and the ongoing negative impactbeginning of ~~Russia-Ukraine war on the global economy. In addition, we anticipate that residential mortgage and other consumer loan activity~~2023. We will continue to ~~slow meaningfully~~be selective on the lending side and generally supportive of compelling projects led by our high quality and tenured customer base. Moving forward, we anticipate moderate levels of overall loan growth in the ~~fourth quarter 2022.~~

mid to high single digits on an annualized basis for the remainder of 2023.

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~~June 30, ~~2022.~~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~~increased $11.2 million to ~~$294.8~~$256.1 million at ~~September~~June 30, ~~2022~~2023 as compared to ~~June 30, 2022~~ March 31, 2023 mostly due to ~~declines~~increases in both non-accrual ~~commercial and industrial and~~ commercial real estate loans ~~mainly caused~~and commercial and industrial loans, partially offset by ~~a few large loan repayments,~~decreases in construction loans and ~~to a lesser extent, loan charge-offs during the third quarter 2022.~~ residential mortgage loans. NPAs as a percentage of total loans and NPAs totaled ~~0.65~~0.51 percent and ~~0.72~~0.50 percent at ~~September 30, 2022 and~~ June 30, ~~2022,~~2023 and March 31, 2023, 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~~six months ended ~~September~~June 30, ~~2022,~~2023, our overall credit trends have remained stable, and our business and borrowers continued to demonstrate resilience and growth despite the recent challenges ofacross the ~~global supply chain issues, high~~banking system, slower economic growth, 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~~June 30, ~~2022~~2023 due to the aforementioned or other factors potentially impacting our lending customers.

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				June 30, 2023			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	$	6,229		$	20,716		$	11,664
Commercial real estate	Commercial real estate	6,196			10,516			30,807			Commercial real estate	3,612			13,580			6,638
Construction		—			9,108			1,708

Residential mortgage	Residential mortgage	13,045			12,326			9,266			Residential mortgage	15,565			12,599			16,146
Total consumer	Total consumer	6,196			6,009			5,862			Total consumer	8,431			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	33,837			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	7,468			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	1,348			2,133			3,315
Total consumer	Total consumer	1,174			702			554			Total consumer	4,126			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	12,942			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	6,599			8,927			18,392
Commercial real estate	Commercial real estate	15,082			—			—			Commercial real estate	2,242			—			2,292

Construction											Construction	3,990			6,450			3,990
Residential mortgage	Residential mortgage	550			1,188			1,746			Residential mortgage	1,165			1,668			1,866
Total consumer	Total consumer	421			267			400			Total consumer	1,006			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	15,002			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	$	61,781		$	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	$	84,449		$	78,606		$	98,881
Commercial real estate	Commercial real estate	67,319			85,807			79,180			Commercial real estate	82,712			67,938			68,316
Construction	Construction	61,098			49,780			17,618			Construction	63,043			68,649			74,230
Residential mortgage	Residential mortgage	26,564			25,847			33,275			Residential mortgage	20,819			23,483			25,160
Total consumer	Total consumer	3,227			3,279			3,754			Total consumer	3,068			3,318			3,174
Total non-accrual loans	Total non-accrual loans	293,395			313,117			230,458			Total non-accrual loans	254,091			241,994			269,761

Other real estate owned (OREO)	Other real estate owned (OREO)	286			422			1,024			Other real estate owned (OREO)	824			1,189			286
Other repossessed assets	Other repossessed assets	1,122			1,200			1,176			Other repossessed assets	1,230			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)	$	256,145		$	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	0.51		%	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	0.51			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	0.63			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	171.76			180.54			170.02

Loans past due 30 to 59 days decreased ~~$139 thousand~~$20.9 million to ~~$45.0~~$33.8 million at ~~September~~June 30, ~~2022~~2023 as compared to ~~June 30, 2022. Construction~~March 31, 2023 due, in part, to the commercial real estate loans ~~within~~totaling $10.2 million included in this delinquency category ~~decreased $9.1 million due~~at March 31, 2023 that reclassified to ~~one loan acquired from Bank Leumi USA included in this category~~non-accrual loans at June 30, ~~2022 that is reported as~~ ~~60 to 89 days past due at~~ ~~September 30, 2022.~~ 2023. Commercial ~~real estate~~and industrial loans ~~past due~~ 30 to 59 days past due decreased ~~$4.3~~$14.5 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~~improved performance during the ~~process of renewal included in this category at~~ ~~September 30, 2022.~~second quarter 2023.

Loans past due 60 to 89 days ~~increased $11.2~~decreased $14.8 million to ~~$22.7~~$12.9 million at ~~September~~June 30, ~~2022~~2023 as compared to ~~June 30, 2022 mainly~~March 31, 2023 largely due to ~~the one aforementioned construction~~a commercial and industrial loan ~~that migrated to this delinquency category~~ ~~at September 30, 2022.~~

~~Loans past due 90 days or more and still accruing interest increased $14.2~~relationship totaling $21.2 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, included in this delinquency category at ~~September~~March 31, 2023 that became current to all its contractual payments at June 30, ~~2022.~~2023.

Loans 90 days or more past due and still accruing interest decreased $2.8 million to $15.0 million at June 30, 2023 as compared to March 31, 2023 mainly due to decreases in the commercial and industrial and construction loan categories, partially offset by one new matured commercial real estate loan of $2.2 million expected to be paid off in the near term. 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~~increased ~~$19.7~~$12.1 million to ~~$293.4 million at September 30, 2022 as compared to $313.1~~$254.1 million at June 30, ~~2022 mainly due~~2023 as compared to ~~decreases~~$242.0 million at March 31, 2023 mostly driven by an increase in ~~non-performing c~~the commercial real estate loan category. ~~ommercial and industrial and~~Non-accrual commercial real estate loans ~~partially offset by~~increased $14.8 million to $82.7 million at June 30, 2023 due, in part, to the aforementioned migration of two loans totaling $10.2 million from the 30 to 59 days past due delinquency category at March 31, 2023 and one new $4.5 million non-performing loan at June 30, 2023. Non-accrual construction loans decreased $5.6 million to $63.0 million at June 30, 2023 from March 31, 2023 primarily due to the $4.2 million partial charge-off of one loan, ~~relationship totaling $12.7 million put on non-accrual status~~ which was transferred to loans held for sale at ~~September~~June 30, ~~2022.~~2023.

Although the timing of collection is uncertain, management believes that the majority of the non-accrual loans at June 30, 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-accrual~~Non-performing taxi medallion loans totaled $65.8 million of the $84.4 million non-accrual commercial and industrial loans ~~totaled $135.2 million~~ at ~~September~~June 30, ~~2022 and included~~ ~~non-performing~~ 2023. At June 30, 2023, all taxi medallion loans ~~totaling $76.3 million.~~ ~~Non-performing~~ ~~taxi medallion~~in the loan portfolio were on non-accrual status and had related reserves of $41.7 million, or 63.4 percent of such loans, ~~decreased $4.1 million from $80.4 million at June 30, 2022 mostly due to partial loan charge-offs totaling $3.8 million related to one borrower during~~within the ~~third quarter 2022. The partial loan charge-offs were fully reserved for in our~~ allowance for loan ~~losses at June 30, 2022.~~ ~~At September 30, 2022, the taxi medallion loans (primarily collateralized by New York City medallions) had related reserves of $51.4 million, or 67.3 percent of such loans.~~

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~~$824 thousand at ~~September~~June 30, ~~2022~~2023 and ~~declined $136~~decreased $365 thousand as compared to ~~June 30, 2022. During the third quarter 2022, OREO activity continues to trend downward as sales of owned properties outpaced new foreclosures. The~~March 31, 2023. The 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~~properties and net gains on sales of ~~$268 thousand for the~~OREO during the three and ~~nine~~six months ended ~~September~~June 30, ~~2021, respectively.~~2023 and 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 million~~$454 thousand and $~~2.5 million at September 30, 2022 and December 31, 2021, 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 $67.32.6 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,~~2023 and December 31, 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.~~respectively.

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 June 30, 2023, Valley continued to maintain the ~~third quarter 2022, we incorporated a probability weighted three-scenario economic forecast, including Moody's Baseline, S-3 and S-4 scenarios. At September 30, 2022, Valley moderately increased~~majority of its probability weighting used in the economic forecast to the ~~combined Moody's~~Moody’s Baseline scenario with less emphasis on the S-3 downside and S-4 ~~(most adverse) scenarios 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~~adverse scenarios. However, the standalone Moody's Baseline scenario ~~reflects~~reflected a ~~less optimistic~~ more pessimistic outlook ~~than at June 30, 2022~~as compared to March 31, 2023 in terms of GDP growth, unemployment levels and potential near term negative economic impacts given the present uncertain economic ~~conditions~~. conditions.

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

•GDP expansion ~~by about 1.6~~of approximately 0.6 percent in the ~~fourth~~third quarter ~~2022;~~2023;

•Unemployment of ~~3.7~~3.6 percent in the ~~fourth~~third quarter ~~2022~~2023 and ~~3.9~~3.8 to ~~4.1~~4.3 percent over the remainder of the forecast period ending in the ~~third~~second quarter ~~2024;~~2025;

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

•Consumer spending remained a source of growth and its contribution grew to the largest in nearly two years, as the cost-of-living adjusted boosted after-tax income adding another 2.5 percent to growth;

•The Federal Reserve opted to pause its rate hikes in June 2023, keeping the federal funds rate at 5 - 5.25 percent with possible additional reductions in 2023; and

•~~U.S. economic growth~~Inflation remains elevated but continues to trend downward, while reporting at approximately 4 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.~~May 2023.

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

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									Six Months Ended
		September 30, 2022			June 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021				June 30, 2023			March 31, 2023			June 30, 2022			June 30, 2023			June 30, 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	$	460,969		$	483,255		$	379,252		$	483,255		$	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)			—			(1,368)			—
Allowance for purchased credit deteriorated (PCD) loans, net (2)																	Allowance for purchased credit deteriorated (PCD) loans, net (2)	—			—			70,319			—			70,319
Beginning balance, adjusted																	Beginning balance, adjusted	460,969			481,887			449,571			481,887			446,021
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	(3,865)			(26,047)			(4,540)			(29,912)			(6,111)
Commercial real estate	Commercial real estate	(4,000)			—			—			(4,173)			(382)			Commercial real estate	(2,065)			—			—			(2,065)			(173)

Construction																	Construction	(4,208)			(5,698)			—			(9,906)			—
Residential mortgage	Residential mortgage	—			(1)			—			(27)			(139)			Residential mortgage	(149)			—			(1)			(149)			(27)
Total consumer	Total consumer	(962)			(726)			(771)			(2,513)			(3,389)			Total consumer	(1,040)			(828)			(726)			(1,868)			(1,551)
Total charge-offs	Total charge-offs	(9,995)			(5,267)			(2,019)			(17,857)			(23,193)			Total charge-offs	(11,327)			(32,573)			(5,267)			(43,900)			(7,862)
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	2,173			1,399			1,952			3,572			2,776
Commercial real estate	Commercial real estate	1,729			224			29			2,060			759			Commercial real estate	4			24			224			28			331
Construction		—			—			—			—			4

Residential mortgage	Residential mortgage	163			74			228			694			576			Residential mortgage	135			21			74			156			531
Total consumer	Total consumer	477			697			955			2,431			3,359			Total consumer	390			761			697			1,151			1,954
Total recoveries	Total recoveries	15,605			2,947			1,726			21,197			7,479			Total recoveries	2,702			2,205			2,947			4,907			5,592
Net loan recoveries (charge-offs)		5,610			(2,320)			(293)			3,340			(15,714)
Total net loan charge-offs																	Total net loan charge-offs	(8,625)			(30,368)			(2,320)			(38,993)			(2,270)
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	6,332			9,450			43,712			15,782			47,212
Ending balance	Ending balance	$	498,408		$	490,963		$	356,927		$	498,408		$	356,927		Ending balance	$	458,676		$	460,969		$	490,963		$	458,676		$	490,963
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	$	436,432		$	436,898		$	468,819		$	436,432		$	468,819
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	22,244			24,071			22,144			22,244			22,144
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	$	458,676		$	460,969		$	490,963		$	458,676		$	490,963
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	$	8,159		$	9,979		$	38,310		$	18,138		$	41,568
Provision for unfunded credit commitments																	Provision for unfunded credit commitments	(1,827)			(529)			5,402			(2,356)			5,644
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	$	6,332		$	9,450		$	43,712		$	15,782		$	47,212

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	0.92		%	0.95		%	1.13		%	0.92		%	1.13		%

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

(2) 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.

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						Six Months Ended
	June 30, 2023		March 31, 2023		June 30, 2022		June 30, 2023		June 30, 2022
	($ in thousands)
Net loan (charge-offs) recoveries
Commercial and industrial	$	(1,692)	$	(24,648)	$	(2,588)	$	(26,340)	$	(3,335)
Commercial real estate	(2,061)		24		224		(2,037)		158
Construction	(4,208)		(5,698)		—		(9,906)		—
Residential mortgage	(14)		21		73		7		504
Total consumer	(650)		(67)		(29)		(717)		403
Total	$	(8,625)	$	(30,368)	$	(2,320)	$	(38,993)	$	(2,270)
Average loans outstanding
Commercial and industrial	$	9,043,832	$	8,754,853	$	8,304,822	$	8,304,822	$	7,017,820
Commercial real estate	27,808,278		26,555,421		23,319,419		26,735,384		21,303,889
Construction	3,787,183		3,780,615		2,925,741		3,721,735		2,421,678
Residential mortgage	5,489,501		5,363,421		4,727,481		5,337,320		4,706,695
Total consumer	3,329,143		3,405,061		3,239,824		3,268,712		3,142,069
Total	$	49,457,937	$	47,859,371	$	42,517,287	$	47,367,973	$	38,592,151
Annualized net loan charge-offs (recoveries) to average loans outstanding
Commercial and industrial	0.07%		1.13%		0.12%		0.63%		0.10%
Commercial real estate	0.03		0.00		0.00		0.02		0.00
Construction	0.44		0.60		0.00		0.53		0.00
Residential mortgage	0.00		0.00		(0.01)		0.00		(0.02)
Total consumer	0.08		0.01		0.00		0.04		(0.03)
Total loans	0.07		0.25		0.02		0.16		0.01

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

Net ~~recoveries of~~ loan charge-offs totaled ~~$5.6~~$8.6 million ~~for the third quarter 2022 as compared to net loan charge-offs of $2.3 million (excluding $62.4 million of Day 1 PCD loan charge-offs related to the Bank Leumi USA acquisition)~~ for the second quarter 2023 as compared to $30.4 million and $2.3 million for the first quarter 2023 and the second quarter 2022, ~~and~~respectively. The decrease from the first quarter 2023 was mainly due to the elevated net loan ~~charge-offs of $293 thousand for~~charges-offs during the ~~third~~first quarter ~~2021. The net recoveries of loan charge-offs for the third quarter 2022 were~~2023 largely ~~driven by two~~related to one commercial and industrial loan ~~relationships totaling $11.2~~participation charged-off. Gross charge-offs totaled $11.3 million ~~in gross recoveries~~ for the ~~period.~~

~~Partial~~second quarter 2023 and included the $4.2 million partial charge-off related to the valuation of a non-performing construction loan ~~charge-offs~~transferred from the held for investment loan portfolio to loans held for sale at June 30, 2023. This construction loan had specific reserves of ~~taxi medallion loans totaled $3.8~~$5.2 million within the ~~commercial~~allowance for loan losses at March 31, 2023 and, ~~industrial loan category~~as a result, the partial charge-off was fully reserved for ~~the third quarter 2022 as compared~~prior to ~~$143 thousand and $1.9 million during~~ the ~~third quarter 2021 and~~ second quarter ~~2022, respectively.~~ 2023.

The ~~overall level~~amount of net loan charge-offs (as presented in the above table) and the low level of individual loan charge-offs for the second 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 June 30, 2023.

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					June 30, 2023				March 31, 2023				June 30, 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	$	128,245	1.38	%	$	127,992	1.42	%	$	144,539	1.70	%
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	194,177		0.70		190,420		0.70		227,457		0.97
Construction	Construction	50,656		1.42		49,770		1.47		21,515		1.19		Construction	45,518		1.19		52,912		1.42		49,770		1.47
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	239,695		0.76		243,332		0.79		277,227		1.03
Residential mortgage loans	Residential mortgage loans	36,157		0.70		29,889		0.60		24,732		0.57		Residential mortgage loans	44,153		0.79		41,708		0.76		29,889		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	4,020		0.75		4,417		0.86		3,907		0.91
Auto and other consumer	Auto and other consumer	13,673		0.49		13,257		0.49		10,087		0.40		Auto and other consumer	20,319		0.70		19,449		0.69		13,257		0.49
Total consumer loans	Total consumer loans	17,756		0.55		17,164		0.55		14,197		0.49		Total consumer loans	24,339		0.71		23,866		0.71		17,164		0.55
Allowance for loan losses	Allowance for loan losses	475,744		1.05		468,819		1.08		342,527		1.05		Allowance for loan losses	436,432		0.88		436,898		0.90		468,819		1.08
Allowance for unfunded credit commitments	Allowance for unfunded credit commitments	22,664				22,144				14,400				Allowance for unfunded credit commitments	22,244				24,071				22,144
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	$	458,676			$	460,969			$	490,963
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			0.92	%			0.95	%			1.13	%

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 percent at September 30, 2022 as compared to 1.13 percent and 1.09~~0.92 percent at June 30, 2023 as compared to 0.95 percent and 1.13 percent at March 31, 2023 and June 30, 2022, ~~and September 30, 2021, respectively~~. respectively. During the ~~third~~second quarter ~~2022,~~2023, the provision for credit losses for loans ~~totaled $1.8~~totaled $6.3 million as compared to $9.5 million and $43.7 million for the first quarter 2023 and second quarter 2022, respectively. At June 30, 2023, our allowance for credit losses for loans as a percentage of total loans decreased as compared to $43.7 million and $3.5 million for the second quarter 2022 and third quarter 2021, respectively. The second quarter 2022 provision was largely elevated due to $41 million of provision related to non-PCD loans and unfunded credit commitments acquired from Bank Leumi USA. Overall, an increasedMarch 31, 2023 as higher economic forecast ~~reserve component of our CECL model (driven~~reserves driven by a more pessimistic Moody's Baseline outlook ~~incorporated into the updated Moody's scenarios)~~ was ~~largely~~more than offset by lower ~~expected~~non-economic qualitative reserves for commercial loans. The net impact of other changes in quantitative ~~loss experience~~reserves for each loan category was not significant to the total allowance for loan losses at ~~September~~June 30, ~~2022~~2023.

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~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, shareholders’ equity totaled approximately ~~$6.3~~$6.6 billion and ~~$5.1~~$6.4 billion, which represented ~~11.2~~10.7 percent and ~~11.7~~11.1 percent of total assets, respectively.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, total shareholders’ equity increased by approximately ~~$1.2 billion~~$174.4 million primarily due ~~to:~~

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

•net income of ~~$391.3~~$285.6 million,

•a $~~10.6~~7.7 million iin~~ncrease~~crease attributable to the effect of our stock incentive plan,

•additional capital issued totaling $3.8 million,

•a $990 thousand net cumulative effect adjustment to retained earnings for the adoption of ASU 2022-02, partially offset by

•cash dividends declared on common and preferred stock totaling a combined $~~168.8~~120.9 million,

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

•repurchases of ~~$13.5~~$2.1 million of our common stock with these shares held asin treasury ~~stock.~~stock and

•other comprehensive loss of$745 thousand.

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~~June 30, ~~2022~~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~~June 30, ~~2022,~~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.

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~~June 30, ~~2022~~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 June 30, 2023														As of June 30, 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	$	5,735,239	11.52	%	$	5,227,963	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	5,824,996		11.70		5,225,830		10.50		$	4,976,981	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	4,497,984		9.03		3,485,309		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	5,446,582		10.94		3,483,887		7.00		3,235,038		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	4,712,825		9.47		4,232,161		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	5,446,582		10.94		4,230,434		8.50		3,981,585		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	4,712,825		7.86		2,399,186		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	5,446,582		9.08		2,399,094		4.00		2,998,868		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~~60.0 percent for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 as compared to ~~60.7~~61.4 percent for the year ended December 31, ~~2021.~~2022.

Cash dividends declared amounted to ~~$0.33~~$0.22 per common share for each of the ~~nine~~six months ended ~~September~~June 30, ~~2022~~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.


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 7269 for a discussion of interest rate ~~sensitivity.~~risk.


Item 4.			Controls and Procedures

(a) Disclosure ~~controls~~control 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~~control 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~~June 30, ~~2022~~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.

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, and previously disclosed in Valley’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023:

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~~June 30, ~~2022~~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)
April 1, 2023 to April 30, 2023	27,407	$	9.24	—	25,000,000
May 1, 2023 to May 31, 2023	300,493	6.98		300,000	24,700,000
June 1, 2023 to June 30, 2023	25,042	7.38		—	24,700,000
Total	352,942	$	7.18	300,000

(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~~Information

a.None.

b.None.

90c.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).~~2023 Incentive Compensation Plan.* +
	(10.2)	Form of Change in Control Agreement for Senior Executive Vice President ,dated January 16, 2019, incorporated herein by reference to Exhibit 10 DD to the Registrant’s Form 10-K filed on February 28, 2019 (covering Raja Dakkuri).+
(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~~herewith.
+			Management contract and compensatory plan or arrangement.

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~~August 7, 2023

Ira Robbins

Chairman of the Board and

Chief Executive Officer

(Principal Executive Officer)

Date:

/s/ Michael D. Hagedorn

~~November 8, 2022~~August 7, 2023

Michael D. Hagedorn

Senior Executive Vice President and

Chief Financial Officer

(Principal Financial Officer)


	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