Valley National Bancorp (VLY) 8-K/A Consolidated Financial Statements

Exhibit 99.2

Bank Leumi Le Israel Corporation and Subsidiaries

Consolidated Statements of Financial Condition

(Dollars in thousands)

(Unaudited)

	March 31 December 31
(Dollars in thousands)	2022			2021
Assets
Cash and due from banks	$	443,588		$	601,052
Securities:
Held-to-maturity		534,317			538,645
Available-for-sale		844,538			1,095,961
Loans, net of allowance for loan losses of $60,365 as of March 31, 2022 and $70,104 as of December 31, 2021		5,940,687			5,738,703
Fixed assets		117,429			41,525
Bank owned life insurance		126,861			126,299
Accrued interest receivable		25,717			27,811
Deferred tax assets, net		65,952			38,896
Other assets		103,255			99,433
Total assets		8,202,344			8,308,325
Liabilities and shareholders’ equity
Liabilities:
Deposits:
Non interest-bearing deposits		4,498,838			4,516,316
Interest-bearing deposits		2,530,892			2,575,578
Total deposits		7,029,730			7,091,894
Borrowings from the Federal Home Loan Bank		103,794			103,794
Other liabilities		202,206			200,994
Total liabilities		7,335,730			7,396,682
Shareholders’ equity:
Capital stock–$0.10 par value; authorized–24,000,000 shares; issued and outstanding–22,317,655 shares		2,231			2,231
Additional paid-in capital		446,803			446,557
Retained earnings		501,440			480,464
Accumulated other comprehensive loss		(83,860	)		(18,185	)
Total shareholders’ equity		866,614			911,067
Non-controlling interest		—			576
Total liabilities and shareholders’ equity	$	8,202,344		$	8,308,325

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Bank Leumi Le Israel Corporation and Subsidiaries

Consolidated Statements of Net Income

(Dollars in thousands)

	Three-Month Periods Ended March 31
(Dollars in thousands)	2022		2021
Interest income:
Interest on loans	$	56,040	$	51,679
Interest on securities		8,516		8,433
Interest–other		185		67
Total interest income		64,741		60,179
Interest expense:
Interest on deposits		1,374		2,018
Interest–other		359		570
Total interest expense		1,733		2,588
Net interest income		63,008		57,591
Less: provision for loan losses		2,824		1,053
Net interest income after provision for loan losses		60,184		56,538
Non-interest income:
Commissions and fees		15,308		13,492
Gain (Loss) on sale of available-for-sale securities, net		3,307		(258	)
Gain on foreign exchange transactions, net		1,311		1,154
Other income, net		1,564		1,838
Total non-interest income		21,490		16,226
Non-interest expense:
Compensation and employee benefits		29,308		28,249
Equipment and data processing		8,871		8,453
Professional services		6,249		4,118
Occupancy		2,850		2,932
Other		3,867		2,324
Total non-interest expense		51,145		46,076
Income before taxes		30,529		26,688
Income tax expense		9,546		6,405
Net income	$	20,983	$	20,283
Less: net income attributable to non-controlling interest		7		10
Net income attributable to the controlling interest	$	20,976	$	20,273

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Bank Leumi Le Israel Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

	Three-Months Ended March 31
(Dollars in thousands)	2022			2021
Net income	$	20,976		$	20,273
Other comprehensive income (loss):
Unrealized actuarial gain on pension and other post-retirement benefits, net of tax		1,116			—
Unrealized loss on cash flow hedges, net of tax		(13,576	)		(7,752	)
Unrealized loss on available-for-sale securities, net of tax		(53,215	)		(33,662	)
Comprehensive loss	$	(44,699	)	$	(21,141	)

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Bank Leumi Le Israel Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(Dollars in thousands)

For the Three Months Ended March 31, 2022

	Capital stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)			Total			Non- controlling interest (“NCI”)			Total with NCI
Balances as of December 31, 2021	$	2,231	$	446,557	$	480,464	$	(18,185	)	$	911,067		$	576		$	911,643
Share-based compensation		—		246		—		—			246			—			246
Comprehensive income:
Net income		—		—		20,976		—			20,976			7			20,983
Other comprehensive income (loss)		—		—		—		(65,675	)		(65,675	)		—			(65,675	)
Effect of subsidiary reverse share split		—		—		—		—			—			(583	)		(583	)
Balances as of March 31, 2022	$	2,231	$	446,803	$	501,440	$	(83,860	)	$	866,614		$	—		$	866,614

For the Three Months Ended March 31, 2021

	Capital stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)			Total			Non- controlling interest (“NCI”)		Total with NCI
Balances as of December 31, 2020	$	2,231	$	445,567	$	401,284	$	17,805		$	866,887		$	539	$	867,426
Share-based compensation		—		246		—		—			246			—		246
Comprehensive income:
Net income		—		—		20,273		—			20,273			10		20,283
Other comprehensive income (loss)		—		—		—		(41,414	)		(41,414	)		—		(41,414	)
Balances as of March 31, 2021	$	2,231	$	445,813	$	421,557	$	(23,609	)	$	845,992		$	549	$	846,541

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Bank Leumi Le Israel Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

	Three-Month Periods Ended March 31
(Dollars in thousands)	2022			2021
Operating activities
Net income	$	20,976		$	20,273
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		2,824			1,053
Net income attributable to non-controlling interest		7			10
Depreciation of fixed assets		3,105			3,223
Net (accretion) amortization on securities		(1,443	)		171
Net (gain) loss on sale of securities		(3,307	)		258
Increase in bank owned life insurance, net		(562	)		(595	)
Decrease (increase) in accrued interest receivable		2,094			(2,371	)
Increase in other assets		(2,980	)		(23,617	)
Decrease in other liabilities		(93,600	)		(16,421	)
Net cash used in operating activities		(72,886	)		(18,016	)
Investing activities
Proceeds from sales, redemptions and paydowns of available-for-sale securities		252,215			265,466
Purchases of available-for-sale securities		(74,999	)		(649,242	)
Proceeds from paydowns and redemptions of held-to-maturity securities		5,798			46,128
Purchases of held-to-maturity securities		—			(92,746	)
Net (purchase) sales of Federal Home Loan Bank capital stock		(234	)		2,385
Net (increase) decrease in loans		(204,808	)		16,630
Purchases of equipment		(407	)		(820	)
Net cash used in investing activities		(22,435	)		(412,199	)
Financing activities
Net (decrease) increase in deposits		(62,163	)		1,111,901
Decrease in borrowings from Federal Home Loan Bank		—			(53,000	)
Net cash provided by financing activities		(62,163	)		1,058,901
Net (decrease) increase in cash and due from banks		(157,464	)		628,692
Cash and due from banks–beginning of year		601,052			82,205
Cash and due from banks and restricted cash–end of period	$	443,588		$	710,897

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Bank Leumi Le Israel Corporation and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, Unaudited)

1. Organization and Summary of Significant Accounting Policies

Bank Leumi Le-Israel Corporation (“BLLC” or “the Company”), a corporation organized in the state of New York BLLC, through its subsidiary Bank Leumi USA (“BLUSA”) conducts its U.S. operations through branches located in New York, Illinois, California and Florida. BLUSA is a full service community bank focused on providing financial services to its customers in its geographical markets. The financial services provided to the customers and management of its investment portfolio are BLLC’s and BLUSA’s primary sources of revenue.

Included in the consolidation is Leumi Investment Services Inc. (“LISI”), a wholly owned subsidiary of BLUSA. LISI is a registered securities broker-dealer with the Securities and Exchange Commission and is a member of the Financial Industry Regulatory Authority (“FINRA”).

The accounting policies of BLLC and its subsidiaries conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”). A summary of the accounting and reporting policies follows:

Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of BLLC and its subsidiaries. All significant intercompany transactions are eliminated in consolidation. Certain reclassifications have been made to the prior period’s financial statements and notes to conform to the current period’s presentation.

Use of Estimates in the Preparation of the Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates. Significant accounting estimates include estimates for the allowance for loan losses, derivatives, securities and evaluation of other-than-temporary impairment, the realization of deferred tax assets, calculation of pension and post-retirement obligations and litigation reserves.

Recent Accounting Pronouncements

In February 2016, the FASB issued No. ASU 2016-02, Leases (Topic 842), which amends the existing standards for lease accounting effectively bringing most leases onto the balance sheets of the related lessees. The ASU is effective for public business entities for interim and annual reporting periods beginning after December 15, 2018. In June 2020, the FASB deferred the effective date for private entities to interim and annual reporting periods beginning after December 15, 2021, with early adoption permitted. Effective January 1, 2022, BLLC adopted ASU 2016-02, Leases (Topic 842) and recorded a right of use asset of approximately $78.6 million and lease obligations of approximately $94.3 million. The right of use asset is recorded in Fixed Asset and the lease obligation is recorded in Other Liabilities.

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2. Investment in Debt Securities

The amortized cost and fair value of investment in debt securities as of the applicable period end are as follows:

	March 31, 2022
(Dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Available-for-sale securities:
Mortgage related:
Agency-backed	$	313,041	$	—	$	(21,175	)	$	291,866
Private label		13,943		3		(323	)		13,623
Other securities:
U.S. government treasuries		341,280		—		(37,285	)		303,995
U.S. federal agencies		75,000		—		(11,242	)		63,758
Foreign governments		25,000		582		—			25,582
State and municipal		105,818		976		(8,615	)		98,179
Corporate and bank debt securities		52,188		—		(4,653	)		47,535
Total available-for-sale securities	$	926,270	$	1,561	$	(83,293	)	$	844,538
Held-to-maturity securities:
Mortgage related
Agency-backed		8,089		3		(1,338	)		6,754
Other securities
U.S. federal agencies		246,810		—		(43,989	)		202,821
State and municipal		279,418		4,034		(24,720	)		258,732
Total held-to-maturity securities	$	534,317	$	4,037	$	(70,047	)	$	468,307

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	December 31, 2021
(Dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Available-for-sale securities:
Mortgage related:
Agency-backed	$	408,721	$	3,384	$	(2,708	)	$	409,397
Private label		15,741		69		(37	)		15,773
Other securities:
U.S. government treasuries		341,223		—		(16,291	)		324,932
U.S. federal agencies		74,911		—		(2,801	)		72,110
Foreign governments		25,000		1,432		—			26,432
Corporate and bank debt securities		81,224		1,521		(780	)		81,965
State and municipal securities		156,471		8,909		(28	)		165,352
Total available-for-sale securities	$	1,103,291	$	15,315	$	(22,645	)	$	1,095,961
Held-to-maturity securities:
Mortgage related
Agency-backed		13,157		48		(1,226	)		11,979
Other securities
U.S. federal agencies		246,762		—		(13,722	)		233,040
State and municipal		278,726		18,827		(400	)		297,153
Total held-to-maturity securities	$	538,645	$	18,875	$	(15,348	)	$	542,172

3. Loans

BLLC monitors credit quality by evaluating various attributes and utilizes similar information in the assessment of the adequacy of the allowance for credit losses. The following sections provide the credit quality indicators BLLC most closely monitors. All loans are subject to individual risk assessment using BLLC’s internal credit risk ratings. The internal credit risk ratings are aligned to Pass and Criticized categories. The Criticized category includes Special Mention, Substandard and Doubtful categories, which are defined by banking regulatory agencies. Criticized credits are analyzed on a quarterly basis.

Credit Quality

The summarized gross loan balance of Criticized loans by portfolio class as of the applicable period end is as follows:

	March 31, 2022						December 31, 2021
(Dollars in thousands)	Special mention		Substandard		Doubtful		Special mention		Substandard		Doubtful
Healthcare	$	15,432	$	12,705	$	—	$	30,592	$	12,704	$	—
Real estate		61,989		32,489		—		73,678		21,398		—
Middle market and other		26,195		13,209		—		10,071		36,154		—
Total credit risk by segment	$	103,616	$	58,403	$	—	$	114,341	$	70,256	$	—��

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4. Allowance for Loan Losses

The following tables provide information on the activity in the allowance for loan losses by the respective loan portfolio class for the three months ended March 31.

	Three Months Ending March 31, 2022
(in thousands)	Healthcare			Real estate			Middle market & other			Total
Balance at beginning of year	$	14,487		$	28,968		$	26,649		$	70,104
Provision (credit)		(1,012	)		(6,886	)		10,722			2,824
Charge-offs		—			(783	)		(11,995	)		(12,778	)
Recoveries		192			6			17			215
Net (charge-offs)/recoveries		192			(777	)		(11,978	)		(12,563	)
Balance at end of period		13,667			21,305			25,393			60,365
Ending balance: individually and collectively evaluated for impairment	$	617,097		$	3,079,647		$	2,316,259		$	6,013,003
Less: deferred fees net											(11,951	)
Total gross loans										$	6,001,052

	Three Months Ending March 31, 2021
(in thousands)	Healthcare			Real estate			Middle market & other			Total
Balance at beginning of year	$	27,322		$	30,362		$	21,750		$	79,434
Provision (credit)		(30	)		1,504			(421	)		1,053
Charge-offs		(4,569	)		(2,349	)		(3,333	)		(10,251	)
Recoveries		150			6			1			157
Net (charge-offs)/recoveries		(4,419	)		(2,343	)		(3,332	)		(10,094	)
Balance at end of period		22,873			29,523			17,997			70,393
Ending balance: individually and collectively evaluated for impairment	$	765,706		$	2,464,591		$	2,175,039		$	5,405,336
Less: deferred fees, net											(15,200	)
Total gross loans										$	5,390,136

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