# Valley National Bancorp: Form 10-Q for the period ended Mar 31, 2024

- Company: [Valley National Bancorp](/companies/vly.md) (CIK 714310)
- Form: 10-Q
- Filed: 2024-05-08
- Accepted by EDGAR: May 8, 2024, 15:38 ET
- Period: 2024-03-31
- Accession: 0000714310-24-000084
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/714310/000071431024000084/vly-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/714310/000071431024000084/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $435.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $33.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $96.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.18 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.18 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 510,633,945 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $99.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $3.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $57.9m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $7.4m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2024-03-31 | $61.00bn | us-gaap:Assets |
| Total liabilities | at 2024-03-31 | $54.27bn | us-gaap:Liabilities |
| Short-term borrowings | at 2024-03-31 | $75.2m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-03-31 | $6.73bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 114,526 characters.

The following MD&A should be read in conjunction with the consolidated financial statements and notes thereto appearing in Part I, Item 1 of this report. The MD&A contains supplemental financial information, described in the sections that follow, which has been determined by methods other than GAAP that management uses in its analysis of our performance. Management believes these non-GAAP financial measures provide information useful to investors in understanding our underlying operational performance, our business and performance trends and facilitate comparisons with the performance of others in the financial services industry. These non-GAAP financial measures should not be considered in isolation or as a substitute for or superior to financial measures calculated in accordance with GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.

### Cautionary Statement Concerning Forward-Looking Statements

The foregoing contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about our business, new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by such forward-looking terminology as “intend,” “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “would,” “could,” “typically,” “usually,” “anticipate,” “may,” “estimate,” “outlook,” “project” or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties. Actual results may differ materially from such forward-looking 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 monetary and fiscal policies of the federal government and its agencies, including in response to higher inflation, which could have a material adverse effect on our clients, as well as our business, our employees, and our ability to provide services to our customers;
- the impact of a potential U.S. Government shutdown, default by the U.S. government on its debt obligations, or related credit-rating downgrades, on economic activity in the markets in which we operate and, in general, on levels of end market demand in the economy;
- the impact of unfavorable macroeconomic conditions or downturns, instability or volatility in financial markets, unanticipated loan delinquencies, loss of collateral, decreased service revenues, increased business disruptions or failures, reductions in employment, and other potential negative effects on our business, employees or clients caused by factors outside of our control, such as geopolitical instabilities or events (including the Israel-Hamas war); natural and other disasters (including severe weather events); health emergencies; acts of terrorism or other external events;
- the impact of potential instability within the U.S. financial sector related to bank failures, including the possibility of deposit withdrawals by a coordinated deposit base, and the impact of any concerns about the creditworthiness of other financial institutions, including any resulting disruption within the financial markets, increased expenses, including FDIC insurance premiums, or adverse impact on our stock price, deposits or our ability to borrow or raise capital;
- the impact of negative public opinion regarding Valley or banks in general that damages our reputation and adversely impacts business and revenues;
- greater than expected costs or difficulties related to Valley's new core banking system implemented in the fourth quarter 2023 and continued enhancements to processes and systems under Valley's current technology roadmap;
- the loss of or decrease in lower-cost funding sources within our deposit base;
- damage verdicts or settlements or restrictions related to existing or potential class action litigation or individual litigation arising from claims of violations of laws or regulations, contractual claims, breach of fiduciary responsibility, negligence, fraud, environmental laws, patent, trademark or other intellectual property infringement, misappropriation or other violation, employment related claims, and other matters;
- a prolonged downturn in the economy, as well as an unexpected decline in commercial real estate values collateralizing a significant portion of our loan portfolio;
- higher or lower than expected income tax expense or tax rates, including increases or decreases resulting from changes in uncertain tax position liabilities, tax laws, regulations and case law;
- the inability to grow customer deposits to keep pace with loan growth;
- a material change in our allowance for credit losses under CECL due to forecasted economic conditions and/or unexpected credit deterioration in our loan and investment portfolios;
- the need to supplement debt or equity capital to maintain or exceed internal capital thresholds;
- 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;
- cyberattacks, ransomware attacks, computer viruses, malware or other cybersecurity incidents that may breach the security of our websites or other systems or networks to obtain unauthorized access to personal, confidential, proprietary or sensitive information, destroy data, disable or degrade service, or sabotage our systems or networks;
- results of examinations by the OCC, the FRB, the CFPB and other regulatory authorities, including the possibility that any such regulatory authority may, among other things, require us to increase our allowance for credit losses, write-down assets, reimburse customers, change the way we do business, or limit or eliminate certain other banking activities;
- our inability or determination not to pay dividends at current levels, or at all, because of inadequate earnings, regulatory restrictions or limitations, changes in our capital requirements or a decision to increase capital by retaining more earnings;
- unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other public health crises, acts of terrorism or other external events; 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 Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2023.

We undertake no duty to update any forward-looking statement to conform the statement to actual results or changes in our expectations, except as required by law. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

### Critical Accounting Estimates

Valley’s accounting policies are fundamental to understanding management’s discussion and analysis of its financial condition and results of operations. In preparing the consolidated financial statements, management has made estimates, judgments and assumptions in accordance with these policies that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of financial condition and results of operations for the periods indicated. At March 31, 2024, we identified our policies on the allowance for credit losses, goodwill and other intangible assets, and income taxes to be critical accounting policies because management has to make subjective and/or complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. Management has reviewed the application of these policies and estimates with the Audit Committee of Valley’s Board. Our critical accounting policies and estimates are described in detail in Part II, Item 7 in Valley’s Annual Report, and there have been no material changes in such policies and estimates since the date of such report.

### New Authoritative Accounting Guidance

See Note 4 to the consolidated financial statements for a description of new authoritative accounting guidance, including the dates of adoption and effects on results of operations and financial condition.

### Executive Summary

**Company Overview.** At March 31, 2024, Valley had consolidated total assets of approximately $61.0 billion, total net loans of $49.5 billion, total deposits of $49.1 billion and total shareholders’ equity of $6.7 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 230 branch network, 55 percent, 18 percent, and 18 percent of the branches are located in New Jersey, New York and Florida, respectively, with the remaining 9 percent of the branches in Alabama, California, and Illinois combined.

In February 2024, we completed the sale of our commercial premium finance lending business, including $93.6 million of our premium finance loan portfolio. The transaction generated a pre-tax $3.6 million net gain on sale of assets for the first quarter 2024. Valley continues to hold certain commercial premium finance loans totaling $145.7 million at March 31, 2024 which are expected to mostly run-off at their scheduled maturity dates over the next 12 months.

**Financial Condition.** The combination of an inverted yield curve, a high level of competition and economic uncertainty, among other factors, continued to weigh on the banking industry during the first quarter 2024. In the face of these challenges, we have positioned our balance sheet to best mitigate these negative factors, while focused on longer term earnings performance. The following items are key highlights at March 31, 2024.

- Total assets was $61.0 billion at March 31, 2024 and remained relatively unchanged from December 31, 2023. Our liquid assets totaled $2.7 billion at March 31, 2024, representing 4.8 percent of interest earning assets as compared with $2.4 billion, or 4.3 percent of interest earning assets at December 31, 2023. We continue to maintain significant access to readily available, diverse funding sources to fulfill both short-term and long-term funding needs. See the “Bank Liquidity” section for additional information.
- Total deposits decreased $164.9 million to $49.1 billion at March 31, 2024 as compared to $49.2 billion at December 31, 2023 due to contractual run-off of higher cost government banking time deposits combined with a $266.2 million decrease in non-interest bearing deposits which was largely offset by solid growth in direct interest bearing deposits across several delivery channels. See the “Deposits and Other Borrowings” section for more details.
- Capital remained strong with ratios of both Valley and the Bank exceeding all capital adequacy requirements at March 31, 2024. Total shareholders' equity increased $25.7 million to $6.7 billion at March 31, 2024 as compared to December 31, 2023. See the “Capital Adequacy” section for additional details.
- Total loans decreased $288.3 million, or 2.3 percent on an annualized basis to $49.9 billion at March 31, 2024 from December 31, 2023 largely due to the sale of $196.5 million of commercial real estate and construction loans through loan participation agreements at par value in March 2024, and the sale of $93.6 million of commercial and industrial loans associated with the sale of our premium finance lending division in February 2024. During the first quarter 2024, we also transferred $34.1 million of construction loans to loans held for sale at March 31, 2024. Organic loan volumes in most categories remained at modest levels during the first quarter 2024 due to the ongoing impact of elevated market interest rates and other factors. See further details on our loan activities under the “Loan Portfolio” section below.
- Asset quality continued to reflect our disciplined underwriting and lending practices during the first quarter 2024. Non-performing assets (NPAs) as a percentage of total loans and NPAs totaled 0.58 percent at both March 31, 2024 and December 31, 2023. Total net loan charge-offs to average loans was 0.19 percent for the first quarter 2024 as compared with 0.14 percent for the fourth quarter 2023. See the “Non-Performing Assets” section for additional information.
- Total investment securities were $5.2 billion, or 8.6 percent of total assets, at March 31, 2024 and remained relatively unchanged from December 31, 2023. See the “Investment Securities Portfolio” section for more details.

**Quarterly Results.** Net income for the first quarter 2024 was $96.3 million, or $0.18 per diluted common share, as compared to $146.6 million, or $0.28 per diluted common share, for the first quarter 2023. The $50.3 million decrease in quarterly net income as compared to the same quarter one year ago was mainly due to the following changes:

- a $42.5 million decrease in net interest income as higher yields on both new loan originations and adjustable-rate loans were more than offset by an increase in the cost of deposits;
- a $30.8 million increase in our provision for credit losses largely due to additional quantitative reserves allocated to our commercial loan portfolio; and
- an $8.1 million increase in non-interest expense partly due to estimated expenses related to the FDIC special assessment of $7.4 million.

Which were partially offset by:

- a $7.1 million increase in non-interest income that was primarily driven by higher brokerage and tax credit investment advisory fees within wealth management and trust fees, net gains on sales of assets and service charges on deposit accounts, partially offset by lower capital markets income; and
- a $24.0 million decrease in income tax expense mostly due to lower pre-tax income and additional tax credits in the first quarter 2024.

See the “Net Interest Income,” “Non-Interest Income,” “Non-Interest Expense” and “Income Taxes” sections below for more details on the impact of the items above and other infrequent non-core items impacting our first quarter 2024 results.

**U.S. Economic Conditions.** During the first quarter 2024, real gross domestic product (GDP) increased at an annual rate of 1.6 percent as compared to an increase of 3.4 percent during the fourth quarter 2023. The decrease in real GDP growth was primarily due to a decline in net exports, slower government spending and a decline in nonresidential fixed investments. Inflation slightly picked up to 3.5 percent in the first quarter 2024 as compared to 3.4 percent for the fourth quarter 2023 and was largely attributed to price increases at the beginning of the year.

The federal funds upper target rate of 5.50 percent remained unchanged since fourth quarter 2023. On May 1, 2024, Federal Reserve officials noted that readings of inflation have come in above expectations, but it’s unlikely that the next policy rate move will be a rate hike. Currently, many market participants believe that a potential Federal Reserve rate cut is not likely until their December 2024 meeting, if at all, during 2024 due to the weak growth in GDP reported for the first quarter 2024 and persistently high inflation.

The 10-year U.S. Treasury note yield ended the first quarter 2024 at 4.20 percent, or 32 basis points higher as compared to the fourth quarter 2023, and the 2-year U.S. Treasury note yield ended the first quarter 2024 at 4.59 percent, or 36 basis points higher as compared to the fourth quarter 2023.

U.S. commercial banks commercial and industrial loans moderately declined from December 30, 2023 to March 31, 2024. Overall, commercial real estate lending continued to be closely monitored throughout the industry, particularly among regional and midsize banks with sizeable exposures to office space as loan collateral. Some bright spots included an appetite for selective deals and lending in the first quarter and interest in grocery stores, data centers and renewable energy plants properties. Regional banks continue to focus on the all-in return on their banking relationships, often requiring significant deposit accounts or ancillary business in order for them to join or remain in a lending relationship. Additionally, the combination of high interest rates and tight inventories have kept residential real estate sales and both refinanced and purchased residential mortgage loan activity low during the first quarter 2024.

Although Federal Reserve efforts to combat inflation are showing signs of success, several factors, including, but not limited to elevated inflation, new and proposed bank regulatory actions, the inverted yield curve, elevated interest rates and geopolitical conflicts have added a higher level of uncertainty to the future path of the U.S. economy and created a challenging bank operating environment. Should these conditions persist or further deteriorate, they may adversely impact our financial results, as highlighted in this MD&A.

### Deposits and Other Borrowings

Total average deposits decreased by $884.6 million to $48.6 billion for the first quarter 2024 as compared to the fourth quarter 2023 due to decreases of $1.3 billion and $351.7 million in average time and non-interest bearing, deposits, respectively, partially offset by a $802.4 million increase in average savings, NOW and money market deposits. The decrease in average time deposits was primarily due to our intentional run-off of both higher cost indirect customers (i.e., brokered) and government banking time deposits which contractually matured over the last six months. Average non-interest bearing balances modestly declined as compared to the fourth quarter 2023, as some customers continue to closely manage balances and shift funds into other higher-yielding alternatives. The increase in savings, NOW and money market deposits was mostly broad-based, reflecting strong customer inflows from both our physical branch and online delivery channels, as well as our specialized deposit businesses over the last six months. Average non-interest-bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 23 percent, 51 percent and 26 percent of total deposits for the first quarter 2024, respectively as compared to 23 percent, 49 percent and 28 percent of total deposits for the fourth quarter 2023, respectively.

Actual ending balances for deposits decreased $164.9 million to $49.1 billion at March 31, 2024 from December 31, 2023 due to decreases of $433.0 million and $266.2 million in time deposits and non-interest bearing deposits, respectively, largely offset by an increase of $534.3 million in savings, NOW and money market deposits. The decrease in time deposits was primarily due to intentional run-off of higher cost government banking time deposits which had matured. Non-interest bearing balances declined during the first quarter 2024, though remained unchanged as a percentage of total deposits, as some customers continue to closely manage balances and shift funds into other higher-yielding alternatives. The solid growth in savings, NOW and money market deposits was mostly attributable to inflows from our specialty niche deposits, traditional branch and online delivery channels. Non-interest bearing deposits; savings, NOW and money market deposits; and time deposits represented approximately 23 percent, 51 percent and 26 percent of total deposits at March 31, 2024, respectively, as compared to 23 percent, 50 percent and 27 percent of total deposits at December 31, 2023, respectively.

The following table lists, by maturity, uninsured CDs at March 31, 2024:

*(in thousands)*

|  | March 31, 2024 |
| --- | ---: |
| Less than three months | $699,105 |
| Three to six months | 535,918 |
| Six to twelve months | 685,637 |
| More than twelve months | 154,027 |
| Total | $2,074,687 |

Total estimated uninsured deposits, excluding collateralized government deposits and intercompany deposits (i.e., deposits eliminated in consolidation), totaled approximately $11.5 billion, or 24 percent of total deposits, at March 31, 2024 as compared to $12.2 billion, or 25 percent of total deposits, at December 31, 2023.

While we maintained a diversified commercial and consumer deposit base at March 31, 2024, deposit gathering initiatives and our current deposit base could remain challenged due to market competition, attractive investment alternatives, such as U.S. Treasury securities, and other factors. As a result, we cannot guarantee that we will be able to maintain deposit levels at or near those reported at March 31, 2024. Management continuously monitors liquidity and all available funding sources including non-deposit borrowings discussed below. See the “Liquidity and Cash Requirements” section of this MD&A for additional information.

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

*(in thousands)*

| Average short-term borrowings: | Three Months Ended March 31, 2024 | December 31, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: |
| FHLB advances | $1,470,879 | $372,011 | $2,513,983 |
| Securities sold under repurchase agreements | 67,000 | 76,733 | 99,546 |
| Federal funds purchased | — | 1,087 | 190,214 |
| Total | $1,537,879 | $449,831 | $2,803,743 |
| **Average long-term borrowings:** |  |  |  |
| FHLB advances | $1,930,702 | $1,688,725 | $875,053 |
| Subordinated debt | 638,008 | 631,915 | 754,972 |
| Junior subordinated debentures issued to capital trusts | 57,152 | 57,066 | 56,805 |
| Total | $2,625,862 | $2,377,706 | $1,686,830 |

Average short-term borrowings increased $1.1 billion during the first quarter 2024 as compared to the fourth quarter 2023 mostly due to a partial shift from indirect customer CDs and more heavily weighted in short-term FHLB advances in our average mix of funding sources starting in the fourth quarter 2023. Average long-term borrowings (including junior subordinated debentures issued to capital trusts which are presented separately on the consolidated statements of financial condition) moderately increased $248.2 million as compared to the fourth quarter 2023 due to $1.0 billion of new FHLB advances issued during early March 2024. The $1.0 billion of new borrowings have a weighted average rate of 4.52 percent and a weighted average remaining contractual term of 3.6 years at March 31, 2024.

Actual ending balances for short-term borrowings decreased $842.6 million to $75.2 million at March 31, 2024 as compared to December 31, 2023 mainly due to maturities and repayment of FHLB advances. Long-term borrowings increased $934.0 million to $3.3 billion at March 31, 2024 as compared to $2.3 billion at December 31, 2023 due to the new FHLB advances issued in March 2024.

### Non-GAAP Financial Measures

The table below presents selected performance indicators, their comparative non-GAAP measures and the (non-GAAP) efficiency ratio for the periods indicated. Valley believes that the non-GAAP financial measures provide useful supplemental information to both management and investors in understanding Valley's underlying operational performance, business, and performance trends, and may facilitate comparisons of our current and prior performance with the performance of others in the financial services industry. Management utilizes these measures for internal planning, forecasting and analysis purposes. Management believes that Valley’s presentation and discussion of this supplemental information, together with the accompanying reconciliations to the GAAP financial measures, also allows investors to view performance in a manner similar to management. These non-GAAP financial measures should not be considered in isolation, as a substitute for or superior to financial measures calculated in accordance with GAAP. These non-GAAP financial measures may also be calculated differently from similar measures disclosed by other companies.

The following table presents our annualized performance ratios:

*($ in thousands)*

| Selected Performance Indicators GAAP measures: | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net income, as reported | $96,280 | $146,551 |
| Return on average assets | 0.63% | 0.98% |
| Return on average shareholders’ equity | 5.73 | 9.10 |
| **Non-GAAP measures:** |  |  |
| Net income, as adjusted | $99,448 | $154,530 |
| Return on average assets, as adjusted | 0.65% | 1.03% |
| Return on average shareholders' equity, as adjusted | 5.91 | 9.60 |
| Return on average tangible shareholders' equity (ROATE) | 8.19 | 13.39 |
| ROATE, as adjusted | 8.46 | 14.12 |
| Efficiency ratio | 59.10 | 53.79 |

| Common Equity Per Share Data: | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Book value per common share (GAAP) | $12.81 | $12.79 |
| Tangible book value per common share (non-GAAP) | 8.84 | 8.79 |

53

Adjusted net income is computed as follows:

*(in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net income, as reported (GAAP) | $96,280 | $146,551 |
| Non-GAAP adjustments: |  |  |
| Add: FDIC special assessment (1) | 7,394 | — |
| Add: Losses on available for sale and held to maturity debt securities, net (2) | 7 | 24 |
| Add: Restructuring charge (3) | 620 | — |
| Add: Provision for credit losses for available for sale securities (4) | — | 5,000 |
| Add: Merger related expenses (5) | — | 4,133 |
| Less: Gain on sale of commercial premium finance lending division (6) | (3,629) | — |
| Total non-GAAP adjustments to net income | $4,392 | $9,157 |
| Income tax adjustments related to non-GAAP adjustments (7) | (1,224) | (1,178) |
| Net income, as adjusted (non-GAAP) | $99,448 | $154,530 |

(1) Included in the FDIC insurance expense.

(2) Included in gains on securities transactions, net.

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

(4) Included in provision for credit losses for available for sale and held to maturity securities (tax disallowed).

(5) Included primarily within salary and employee benefits expense.

(6) Included in net gains on sale of assets.

(7) Calculated using the appropriate blended statutory tax rate for the applicable period.

In addition to the items used to calculate net income, as adjusted, in the table above, our net income is, from time to time, impacted by fluctuations in the level of net gains on sales of loans, wealth management and trust fees, and capital markets fees. These amounts can vary widely from period to period due to, among other factors, the amount and timing of residential mortgage loans originated for sale, brokerage and tax credit investment advisory activities and commercial loan customer demand for certain interest rate swap products. See the “Non-Interest Income” section below for more details.

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

*($ in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net income, as adjusted (non-GAAP) | $99,448 | $154,530 |
| Average assets | $61,256,868 | $59,867,002 |
| Annualized return on average assets, as adjusted (non-GAAP) | 0.65% | 1.03% |

54

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

*($ in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net income, as adjusted (non-GAAP) | $99,448 | $154,530 |
| Average shareholders' equity | $6,725,695 | $6,440,215 |
| Annualized return on average shareholders' equity, as adjusted (non-GAAP) | 5.91% | 9.60% |

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:

*($ in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net income, as reported (GAAP) | $96,280 | $146,551 |
| Net income, as adjusted (non-GAAP) | 99,448 | 154,530 |
| Average shareholders’ equity (GAAP) | $6,725,695 | $6,440,215 |
| Less: Average goodwill and other intangible assets | 2,024,999 | 2,061,361 |
| Average tangible shareholders’ equity (non-GAAP) | $4,700,696 | $4,378,854 |
| Annualized ROATE (non-GAAP) | 8.19% | 13.39% |
| Annualized ROATE, as adjusted (non-GAAP) | 8.46% | 14.12% |

55

The efficiency ratio is computed as follows:

*($ in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Total non-interest expense, as reported (GAAP) | $280,310 | $272,166 |
| Less: FDIC Special assessment (1) | 7,394 | — |
| Less: Restructuring charge (2) | 620 | — |
| Less: Amortization of tax credit investments | 5,562 | 4,253 |
| Less: Merger related expenses (3) | — | 4,133 |
| Total non-interest expense, as adjusted (non-GAAP) | $266,734 | $263,780 |
| Net interest income, as reported (GAAP) | 393,548 | 436,020 |
| Total non-interest income, as reported (GAAP) | 61,415 | 54,299 |
| Add: Losses on available for sale and held to maturity debt securities, net (4) | 7 | 24 |
| Less: Gain on sale of commercial premium finance lending division (5) | (3,629) | — |
| Gross operating income, as adjusted (non-GAAP) | $451,341 | $490,343 |
| Efficiency ratio (non-GAAP) | 59.10% | 53.79% |

(1) Included in the FDIC insurance expense.

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

(3) Included primarily within salary and employee benefits expense.

(4) Included in gains on securities transactions, net.

(5) Included in gains on sales of assets, net.

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

*($ in thousands, except for share data)*

|  | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Common shares outstanding | 508,893,059 | 507,709,927 |
| Shareholders’ equity (GAAP) | $6,727,139 | $6,701,391 |
| Less: Preferred stock | 209,691 | 209,691 |
| Less: Goodwill and other intangible assets | 2,020,405 | 2,029,267 |
| Tangible common shareholders’ equity (non-GAAP) | $4,497,043 | $4,462,433 |
| Book value per common share (GAAP) | $12.81 | $12.79 |
| Tangible book value per common share (non-GAAP) | $8.84 | $8.79 |

### Net Interest Income

Net interest income on a tax equivalent basis totaling $394.8 million for the first quarter 2024 decreased $3.7 million and $42.6 million as compared to the fourth quarter 2023 and first quarter 2023, respectively. The slight decrease as compared to the fourth quarter 2023 was mainly due to an increase in average short-term borrowings and the higher level of interest rates across most interest bearing deposit products, partially offset by higher loan yields, a decline in average time deposit balances and one less day during the first quarter 2024. As a result of the higher cost of short-term borrowings and deposits, total interest expense increased $14.2 million to $435.1 million for the first quarter 2024 as compared to the fourth quarter 2023. Interest income on a tax equivalent basis increased $10.5 million to $830.0 million for the first quarter 2024 as compared to the fourth quarter 2023. The increase was mostly due to higher yields on both new originations and adjustable rate loans in our loan portfolio, as well as higher yields on investments, partially offset by a decline in average interest bearing deposits with banks as we reduced overnight excess cash liquidity in the first quarter 2024.

Average interest earning assets increased $1.3 billion to $56.6 billion for the first quarter 2024 as compared to the first quarter 2023 mainly due to a $2.4 billion increase in average loan balances driven by organic loan growth in the commercial loan categories during most of 2023, partially offset by a $1.1 billion decline in average interest bearing cash held overnight as our excess liquidity returned to more normalized levels in 2024 after being elevated in response to the bank failures in 2023. Compared to the fourth quarter 2023, average interest earning assets increased by $149.3 million during the first quarter 2024. The increase was mainly driven by increases of $207.2 million and $144.2 million in average loans and taxable investments, respectively, partially offset by a $188.3 million decline in average overnight interest bearing cash balances as compared to the prior linked quarter.

Average interest bearing liabilities increased $3.9 billion to $41.6 billion for the first quarter 2024 as compared to the first quarter 2023 mainly due to increases of $4.3 billion and $939.0 million in average time deposits and long-term borrowings, respectively, partially offset by a decrease of $1.3 billion in average short-term borrowings. The increase in average time deposits was largely due to increased usage of fully FDIC-insured indirect customer CDs and successful direct retail CD initiatives during the second half of 2023, while average long-term borrowings increased due to the issuance of new FHLB advances. As compared to the fourth quarter 2023, average interest bearing liabilities increased by $803.3 million for the first quarter 2024 mainly due to a $1.1 billion increase in average short-term borrowings. The increase in short-term borrowings was mostly due to a partial shift from indirect customer CDs to FHLB advances in our average mix of funding sources during most of the first quarter 2024. See additional information under “Deposits and Other Borrowings” in the Executive Summary section above.

Net interest margin on a tax equivalent basis of 2.79 percent for the first quarter 2024 decreased by 3 basis points and 37 basis points from 2.82 percent and 3.16 percent, respectively, for the fourth quarter 2023 and first quarter 2023. The decrease as compared to the fourth quarter 2023 was largely driven by the higher cost of interest bearing deposits and short-term borrowings, partially offset by an increase in the yield on average interest earning assets. Our cost of total average deposits was 3.16 percent for the first quarter 2024 as compared to 3.13 percent and 1.96 percent for the fourth quarter 2023 and the first quarter 2023, respectively. The overall cost of average interest bearing liabilities increased 6 basis points to 4.19 percent for the first quarter 2024 as compared to the fourth quarter 2023 primarily driven by the higher level of market interest rates on deposits and short-term borrowings. The yield on average interest earning assets also increased by 6 basis points to 5.86 percent on a linked quarter basis largely due to the increased yield of the loan portfolio. The yield on average loans increased by 4 basis points to 6.14 percent for the first quarter 2024 as compared to the fourth quarter 2023 mostly due to the higher level of market interest rates on new originations and adjustable rate loans.

Based upon our latest model estimates, we anticipate net interest income growth in the range of zero to two percent for the full year ended December 31, 2024 as compared to 2023. While we remain optimistic that our net interest income should continue to stabilize and grow during the remainder of 2024 as compared to the first quarter 2024, our forecasts include several uncertain assumptions, including changes in the level of market interest rates. As such, we cannot provide any assurances that our net interest income or margin will remain at the levels reported for the first quarter 2024. For a detailed discussion on the risks related to interest rates please refer to Part I, Item 1A. “Risk Factors” in our Annual Report.

The following table reflects the components of net interest income for the three months ended March 31, 2024, December 31, 2023 and March 31, 2023:

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

### Net Interest Income on a Tax Equivalent Basis

*($ in thousands)*

| Assets Interest earning assets: | Three Months Ended March 31, 2024 Average Balance | Interest | Average Rate | December 31, 2023 Average Balance | Interest | Average Rate | March 31, 2023 Average Balance | Interest | Average Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans (1)(2) | $50,246,591 | $771,577 | 6.14% | $50,039,429 | $762,918 | 6.10% | $47,859,371 | $655,250 | 5.48% |
| Taxable investments (3) | 5,094,978 | 42,625 | 3.35 | 4,950,773 | 40,255 | 3.25 | 5,033,134 | 37,474 | 2.98 |
| Tax-exempt investments (1)(3) | 579,842 | 6,071 | 4.19 | 593,577 | 6,101 | 4.11 | 623,145 | 6,739 | 4.33 |
| Interest bearing deposits with banks | 697,386 | 9,682 | 5.55 | 885,689 | 10,215 | 4.61 | 1,847,140 | 22,205 | 4.81 |
| Total interest earning assets | 56,618,797 | 829,955 | 5.86 | 56,469,468 | 819,489 | 5.80 | 55,362,790 | 721,668 | 5.21 |
| Allowance for credit losses | (450,331) |  |  | (451,110) |  |  | (466,837) |  |  |
| Cash and due from banks | 439,176 |  |  | 314,060 |  |  | 445,005 |  |  |
| Other assets | 4,805,001 |  |  | 5,008,764 |  |  | 4,702,376 |  |  |
| Unrealized gains on securities available for sale, net | (155,775) |  |  | (227,629) |  |  | (176,332) |  |  |
| **Total assets** | $61,256,868 |  |  | $61,113,553 |  |  | $59,867,002 |  |  |
| **Liabilities and Shareholders’ Equity** |  |  |  |  |  |  |  |  |  |
| **Interest bearing liabilities:** |  |  |  |  |  |  |  |  |  |
| Savings, NOW and money market deposits | $24,793,452 | $232,506 | 3.75% | $23,991,093 | $221,500 | 3.69% | $23,389,569 | $150,766 | 2.58% |
| Time deposits | 12,599,395 | 151,065 | 4.80 | 13,934,683 | 165,351 | 4.75 | 9,738,608 | 80,298 | 3.30 |
| Total interest bearing deposits | 37,392,847 | 383,571 | 4.10 | 37,925,776 | 386,851 | 4.08 | 33,128,177 | 231,064 | 2.79 |
| Short-term borrowings | 1,537,879 | 20,612 | 5.36 | 449,831 | 5,524 | 4.91 | 2,803,743 | 33,948 | 4.84 |
| Long-term borrowings (4) | 2,625,862 | 30,925 | 4.71 | 2,377,706 | 28,533 | 4.80 | 1,686,830 | 19,198 | 4.55 |
| Total interest bearing liabilities | 41,556,588 | 435,108 | 4.19 | 40,753,313 | 420,908 | 4.13 | 37,618,750 | 284,210 | 3.02 |
| Non-interest bearing deposits | 11,183,127 |  |  | 11,534,795 |  |  | 14,024,742 |  |  |
| Other liabilities | 1,791,458 |  |  | 2,185,539 |  |  | 1,783,295 |  |  |
| Shareholders’ equity | 6,725,695 |  |  | 6,639,906 |  |  | 6,440,215 |  |  |
| **Total liabilities and shareholders’ equity** | $61,256,868 |  |  | $61,113,553 |  |  | $59,867,002 |  |  |
| Net interest income/interest rate spread (5) |  | $394,847 | 1.67% |  | $398,581 | 1.67% |  | $437,458 | 2.19% |
| Tax equivalent adjustment |  | (1,299) |  |  | (1,306) |  |  | (1,438) |  |
| **Net interest income, as reported** |  | $393,548 |  |  | $397,275 |  |  | $436,020 |  |
| Net interest margin (6) |  |  | 2.78% |  |  | 2.81% |  |  | 3.15% |
| Tax equivalent effect |  |  | 0.01 |  |  | 0.01 |  |  | 0.01 |
| Net interest margin on a fully tax equivalent basis (6) |  |  | 2.79% |  |  | 2.82% |  |  | 3.16% |

(1) Interest income is presented on a tax equivalent basis using a 21 percent federal tax rate.

(2) Loans are stated net of unearned income and include non-accrual loans.

(3) The yield for securities that are classified as AFS is based on the average historical amortized cost.

(4) Includes junior subordinated debentures issued to capital trusts which are presented separately on the consolidated

statements of financial condition.

(5) Interest rate spread represents the difference between the average yield on interest earning assets and the average cost of interest bearing liabilities and is presented on a fully tax equivalent basis.

(6) Net interest income as a percentage of total average interest earning assets.

The following table demonstrates the relative impact on net interest income of changes in the volume of interest earning assets and interest bearing liabilities and changes in rates earned and paid by us on such assets and liabilities. Variances resulting from a combination of changes in volume and rates are allocated to the categories in proportion to the absolute dollar amounts of the change in each category.

### Change in Net Interest Income on a Tax Equivalent Basis

*(in thousands)*

| Interest Income: | Three Months Ended March 31, 2024 Compared to March 31, 2023 Change Due to Volume | Change Due to Rate | Total Change |
| --- | ---: | ---: | ---: |
| Loans\* | $33,840 | $82,487 | $116,327 |
| Taxable investments | 466 | 4,685 | 5,151 |
| Tax-exempt investments\* | (458) | (210) | (668) |
| Interest bearing deposits with banks | (15,536) | 3,013 | (12,523) |
| Total increase in interest income | 18,312 | 89,975 | 108,287 |
| **Interest Expense:** |  |  |  |
| Savings, NOW and money market deposits | 9,529 | 72,211 | 81,740 |
| Time deposits | 27,796 | 42,971 | 70,767 |
| Short-term borrowings | (16,652) | 3,316 | (13,336) |
| Long-term borrowings and junior subordinated debentures | 11,037 | 690 | 11,727 |
| Total increase in interest expense | 31,710 | 119,188 | 150,898 |
| Total decrease in net interest income | $(13,398) | $(29,213) | $(42,611) |

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

### Non-Interest Income

Non-interest income represented 6.9 percent and 7.0 percent of total interest income plus non-interest income for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024, non-interest income increased $7.1 million as compared to the same period in 2023 primarily driven by higher wealth management and trust fees and net gains on sales of assets.

The following table presents the components of non-interest income for the three months ended March 31, 2024 and 2023:

*(in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Wealth management and trust fees | $17,930 | $9,587 |
| Insurance commissions | 2,251 | 2,420 |
| Capital markets | 5,670 | 10,892 |
| Service charges on deposit accounts | 11,249 | 10,476 |
| Gains on securities transactions, net | 49 | 378 |
| Fees from loan servicing | 3,188 | 2,671 |
| Gains on sales of loans, net | 1,618 | 489 |
| Gains on sales of assets, net | 3,694 | 124 |
| Bank owned life insurance | 3,235 | 2,584 |
| Other | 12,531 | 14,678 |
| Total non-interest income | $61,415 | $54,299 |

Wealth management and trust fees income increased $8.3 million for the three months ended March 31, 2024 as compared to the same period in 2023 mainly due to a higher volume of success fees and other related periodic fees generated by our tax credit advisory subsidiary. Brokerage fees also increased $1.4 million to $6.2 million for the three months ended March 31, 2024 as compared to the same period in 2023 due to an uptick in customer trading volume at our broker dealer subsidiary.

Capital markets income decreased $5.2 million for the three months ended March 31, 2024 as compared to the same period in 2023 mainly due to a decline in the volume of interest rate swap transactions, and resulting fees, related to commercial loan customers.

Net gains on sales of assets increased $3.6 million for the three months ended March 31, 2024 as compared to the same period in 2023 largely due to the net gain on the sale of our commercial premium finance lending business in the first quarter 2024.

Other non-interest income decreased $2.1 million for the three months ended March 31, 2024 as compared to the same period in 2023 mostly due to a $2.7 million litigation recovery in the 2023 period.

### Non-Interest Expense

Non-interest expense increased $8.1 million for the three months ended March 31, 2024 as compared to the same period in 2023 due, in part, to a $9.1 million increase in the FDIC insurance assessment expense. The following table presents the components of non-interest expense for the three months ended March 31, 2024 and 2023:

*(in thousands)*

|  | Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Salary and employee benefits expense | $141,831 | $144,986 |
| Net occupancy expense | 24,323 | 23,256 |
| Technology, furniture and equipment expense | 35,462 | 36,508 |
| FDIC insurance assessment | 18,236 | 9,155 |
| Amortization of other intangible assets | 9,412 | 10,519 |
| Professional and legal fees | 16,465 | 16,814 |
| Amortization of tax credit investments | 5,562 | 4,253 |
| Other | 29,019 | 26,675 |
| Total non-interest expense | $280,310 | $272,166 |

Salary and employee benefits expense decreased $3.2 million for the three months ended March 31, 2024 as compared to the same period in 2023. The decrease was largely attributable to merger related costs totaling $4.1 million for the three months ended March 31, 2023, partially offset by higher group medical insurance expense, as well as severance expense related to our back office restructuring efforts during the three months ended March 31, 2024.

FDIC insurance assessment expense increased $9.1 million for the three months ended March 31, 2024 as compared to the same period of 2023 mostly due to additional estimated expenses of $7.4 million related to the FDIC special assessment. The FDIC plans to provide an updated estimate of each institution's quarterly and total special assessment expense with its first quarter 2024 special assessment invoice, to be released in June 2024. Valley will continue to evaluate its current accrual for the special assessment as new information becomes available.

Other non-interest expense increased $2.3 million for the three months ended March 31, 2024 as compared to the same period in 2023 primarily due to moderate increases in several smaller expense categories, including capital taxes, charitable contributions, postage, operating losses, etc.

### Income Taxes

Income tax expense totaled $33.2 million for the first quarter 2024 as compared to $17.4 million and $57.2 million for the fourth quarter 2023 and first quarter 2023, respectively. Our effective tax rate was 25.6 percent, 19.6 percent and 28.1 percent for the first quarter 2024, fourth quarter 2023 and first quarter 2023, respectively. The increase in the effective tax rate from the fourth quarter 2023 was mainly attributable to larger amount of tax credits recognized during the fourth quarter 2023.

GAAP requires that any change in judgment or change in measurement of a tax position taken in a prior annual period be recognized as a discrete event in the quarter in which it occurs, rather than being recognized as a change in effective tax rate for the current year. Our adherence to these tax guidelines may result in volatile effective income tax rates in future quarterly and annual periods. Factors that could impact management’s judgment include changes in income, tax laws and regulations, and tax planning strategies. Based on the current information available, we anticipate that our effective tax rate will be 25 to 26 percent for the full year ended December 31, 2024.

### Operating Segments

Valley manages its business operations under operating segments consisting of Consumer Banking and Commercial Banking. Activities not assigned to the operating segments are included in Treasury and Corporate Other. Each operating segment is reviewed routinely for its asset growth, contribution to income before income taxes, return on average interest earning assets and impairment (if events or circumstances indicate a possible inability to realize the carrying amount). Valley regularly assesses its strategic plans, operations, and reporting structures to identify its operating segments and no changes to the operating segments were determined necessary during the three months ended March 31, 2024.

The accounting for each operating segment and Treasury and Corporate Other includes internal accounting policies designed to measure consistent and reasonable financial reporting and may result in income and expense measurements that differ from amounts under GAAP. The financial reporting for each segment contains allocations and reporting in line with Valley’s operations, which may not necessarily be comparable to those of any other financial institution. Furthermore, changes in management structure or allocation methodologies and procedures may result in changes in reported segment financial data.

The following tables present the financial data for Valley's operating segments, and Treasury and Corporate Other for the three months ended March 31, 2024 and 2023:

*($ in thousands)*

|  | Three Months Ended March 31, 2024 Consumer Banking | Commercial Banking | Treasury and Corporate Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Average interest earning assets | $9,795,462 | $40,451,129 | $6,372,206 | $56,618,797 |
| Income (loss) before income taxes | 12,170 | 158,621 | (41,338) | 129,453 |
| Return on average interest earning assets (before tax) | 0.50% | 1.57% | (2.59)% | 0.91% |

*($ in thousands)*

|  | Three Months Ended March 31, 2023 Consumer Banking | Commercial Banking | Treasury and Corporate Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Average interest earning assets | $9,476,112 | $38,383,259 | $7,503,419 | $55,362,790 |
| Income (loss) before income taxes | 12,324 | 230,567 | (39,175) | 203,716 |
| Return on average interest earning assets (before tax) | 0.52% | 2.40% | (2.09)% | 1.47% |

See Note 15 to the consolidated financial statements for additional details.

### Consumer Banking Segment

The Consumer Banking segment represented 18.3 percent of our loan portfolio at March 31, 2024, 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 11.3 percent of our loan portfolio at March 31, 2024) is subject to movements in the market level of interest rates and forecasted prepayment speeds. The weighted average life of the automobile loans portfolio (which represented 3.4 percent of total loans at March 31, 2024) is relatively unaffected by movements in the market level of interest rates. However, the average life may be impacted by new loans as a result of the availability of credit within the automobile marketplace and consumer demand for purchasing new or used automobiles. Consumer Banking also includes the Wealth Management and Insurance Services Division, comprised of trust, asset management, brokerage, insurance and tax credit advisory services.

Consumer Banking’s average interest earning assets increased $319.4 million to $9.8 billion for the three months ended March 31, 2024 as compared to the same period of 2023. The increase was largely due to new residential mortgage loan volumes originated for investment rather than sale over the last 12-month period and, to a lesser extent, an increase in average home equity loans.

Income before income taxes generated by the Consumer Banking segment decreased $154 thousand to $12.2 million for the first quarter 2024 as compared to the first quarter 2023 and was mainly driven by a combination of a decrease in net interest income and higher internal transfer expense, largely offset by an increase in non-interest income and lower provision for loan losses. Net interest income for this segment decreased $9.0 million mainly due to higher funding costs driven by higher interest rates. The non-interest income increased $8.7 million mainly due to a higher volume of success fees and other related periodic fees generated by our tax credit advisory subsidiary, as well as brokerage fees generated from certain private banking clients. See further details in the “Non-Interest

Income” section of this MD&A. The provision for loan losses decreased $3.4 million for the three months ended March 31, 2024 mainly due to lower loan growth and an improved economic outlook as compared to one year ago. See further details in the “Allowance for Credit Losses” section of this MD&A.

Net interest margin on the Consumer Banking portfolio decreased 44 basis points to 1.65 percent for the first quarter 2024 as compared to the first quarter 2023 mainly due to a 103 basis point increase in the costs associated with our funding sources, partially offset by a 59 basis point increase in the yield on average loans. The increase in our funding costs was mainly driven by higher interest rates on most of our interest bearing deposit products, as well as the mix of our adjustable rate and other borrowings during the first quarter 2024. The 59 basis point increase in loan yield was largely due to higher yielding new loan volumes 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 0.50 percent for the first quarter 2024 compared to 0.52 percent for the first quarter 2023.

### Commercial Banking Segment

The Commercial Banking segment is comprised of floating rate and adjustable rate commercial and industrial loans and construction loans, as well as fixed rate owner occupied and commercial real estate loans. Due to the portfolio’s interest rate characteristics, Commercial Banking is Valley’s operating segment that is most sensitive to movements in market interest rates. Commercial and industrial loans totaled approximately $9.1 billion and represented 18.2 percent of the total loan portfolio at March 31, 2024. Commercial real estate loans and construction loans totaled $31.7 billion and represented 63.5 percent of the total loan portfolio at March 31, 2024.

Average interest earning assets in Commercial Banking segment increased $2.1 billion to $40.5 billion for the three months ended March 31, 2024 as compared to the first quarter 2023 primarily due to organic loan growth over the last 12 month period largely within the commercial real estate loan portfolio.

Income before income taxes for Commercial Banking decreased $71.9 million to $158.6 million for the three months ended March 31, 2024 as compared to the same period of 2023 mainly due to a combination of a higher provision for credit losses and internal transfer expense and a decrease in net interest income. The declines were modestly offset by a $3.6 million gain due to the sale of our commercial premium finance lending business in February 2024. The provision for credit losses increased $39.2 million to $42.2 million as compared to the same period in 2023 due, in part, to higher quantitative reserves mainly within the non-owner occupied commercial real estate loan category and increased specific reserves for collateral dependent non-performing commercial loans. See details in the “Allowance for Credit Losses for Loans” section of this MD&A. Net interest income for this segment decreased $15.3 million to $355.7 million for the first quarter 2024 as compared to the same period in 2023 primarily due to the higher cost of funding and the inverted yield curve. Internal transfer expense also increased $19.2 million to $136.6 million for the three months ended March 31, 2024 as compared to the first quarter 2023. Other income for commercial banking increased $2.2 million to $18.0 million primarily due to a $3.6 million gain recognized on the sale of the premium finance lending division.

The net interest margin for this segment decreased 35 basis points to 3.52 percent for the first quarter 2024 as compared to the first quarter 2023 due to a 103 basis point increase in the cost of our funding sources, partially offset by a 68 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 1.57 percent for the three months ended March 31, 2024 compared to 2.40 percent for the same period in 2023.

### Treasury and Corporate Other

Treasury and Corporate Other largely consists of the Treasury managed AFS and HTM debt securities portfolios mainly utilized in the liquidity management needs of our lending segments and income and expense items resulting from support functions not directly attributable to a specific segment. Interest income is generated through investments in various types of securities (mainly comprised of fixed rate securities) and interest-bearing deposits with other banks (primarily the FRB of New York). Expenses related to the branch network, all other components of retail banking, along with the back office departments of the Bank are allocated from Treasury and Corporate Other to the Consumer Banking and Commercial Banking segments. Interest expense and internal transfer expense (for general corporate expenses) are allocated to each operating segment utilizing a transfer pricing methodology, which involves the allocation of operating and funding costs based on each segment's respective mix of average interest earning assets and/or liabilities outstanding for the period. Other items disclosed in Treasury and Corporate Other include net gains and losses on AFS and HTM securities transactions, interest expense related to subordinated notes, amortization of tax credit investments, as well as other non-core items, including merger, restructuring expenses and FDIC special assessment charges.

Treasury and Corporate Other's average interest earning assets decreased $1.1 billion to $6.4 billion for the three months ended March 31, 2024 primarily due to a $1.1 billion decline in average interest bearing cash held overnight as our excess liquidity returned to more normalized levels in 2024 after being elevated in response to the bank failures in most of 2023.

For the three months ended March 31, 2024, loss before income taxes totaled $41.3 million compared to $39.2 million for the same period in 2023. The $2.2 million increase in the pre-tax loss during the first quarter 2024 was mainly driven by a decrease in net interest income on interest bearing deposits with banks combined with higher non-interest expense. Non-interest expense increased $8.6 million to $225.4 million during the three months ended March 31, 2024 as compared to the same period in 2023 largely due to a $9.1 million increase in the FDIC insurance assessment expense in the first quarter 2024. The negative impact of these items was partially offset by lower provision for credit losses and higher internal transfer income. Provision for credit losses decreased $5.1 million mostly due to credit related impairment of one corporate bond issued by Signature Bank during the first quarter 2023. The internal transfer income increased $23.3 million to $169.7 million for the three months ended March 31, 2024 as compared to the same period in 2023 due to higher allocations of the overhead expense to the Consumer Banking and Commercial Banking segments over the same period. See further details in the “Non-Interest Income” and “Non-Interest Expense” sections of this MD&A.

Treasury and Corporate Other's net interest margin decreased 92 basis points to 0.59 percent for the first quarter 2024 as compared to the first quarter 2023 due to a 103 basis point increase in cost of our funding sources, partly offset by an 11 basis point increase in the yield on average investments. The increase in the yield on average investments as compared to the same period a year ago was largely driven by new higher yielding investments and a reduction in premium amortization expense mostly caused by slower principal repayments in the elevated market interest rate environment.

### ASSET/LIABILITY MANAGEMENT

### Interest Rate Risk

Our success is largely dependent upon our ability to manage interest rate risk. Interest rate risk can be defined as the exposure of our interest rate sensitive assets and liabilities to the movement in interest rates. Our Asset/Liability Management Committee is responsible for managing such risks and establishing policies that monitor and coordinate our sources and uses of funds. Asset/Liability management is a continuous process due to the constant change in interest rate risk factors. In assessing the appropriate interest rate risk levels for us, management weighs the potential benefit of each risk management activity within the desired parameters of liquidity, capital levels and management’s tolerance for exposure to income fluctuations. Many of the actions undertaken by management utilize fair value analysis and attempt to achieve consistent accounting and economic benefits for financial assets and their related funding sources. We have predominantly focused on managing our interest rate risk by attempting to match the inherent risk and cash flows of financial assets and liabilities. Specifically, management employs multiple risk management activities such as optimizing the level of new residential mortgage originations retained in our mortgage portfolio through increasing or decreasing loan sales in the secondary market, product pricing levels, the desired maturity levels for new originations, the composition levels of both our interest earning assets and interest bearing liabilities, as well as several other risk management activities.

We use a simulation model to analyze net interest income sensitivity to movements in interest rates. The simulation model projects net interest income based on various interest rate scenarios over a 12-month period. The model is based on the actual maturity and re-pricing characteristics of rate sensitive assets and liabilities. The model incorporates certain assumptions which management believes to be reasonable regarding the impact of changing interest rates and the prepayment assumptions of certain assets and liabilities as of March 31, 2024. The model assumes immediate changes in interest rates without any proactive change in the composition or size of the balance sheet, or other future actions that management might undertake to mitigate this risk. In the model, the forecasted shape of the yield curve remains static as of March 31, 2024. 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 March 31, 2024. Although the size of Valley’s balance sheet is forecasted to remain static as of March 31, 2024, in our model, the composition is adjusted to reflect new interest earning assets and funding originations coupled with rate spreads utilizing our actual originations during the first quarter 2024. The model utilizes an immediate parallel shift in market interest rates at March 31, 2024.

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.

*($ in thousands)*

| Changes in Interest Rates (in basis points) | Estimated Change in Future Net Interest Income Dollar Change | Percentage Change |
| --- | ---: | ---: |
| +300 | $134,722 | 7.98% |
| +200 | 90,019 | 5.33 |
| +100 | 45,450 | 2.69 |
| –100 | (45,794) | (2.71) |
| –200 | (93,473) | (5.54) |
| –300 | (139,054) | (8.24) |

As noted in the table above, a 100 basis point immediate decrease in interest rates combined with a static balance sheet where the size, mix, and proportions of assets and liabilities remain unchanged is projected to decrease net interest income over the next 12-month period by 2.71 percent. Management believes the interest rate sensitivity of our balance sheet remains within an expected tolerance range at March 31, 2024. 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 Valley's ability to satisfy its current and future cash flow needs. Our objective is to have liquidity available to fulfill loan demands, repay deposits and other liabilities, and execute balance sheet strategies in all market conditions while adhering to internal controls and income targets. Valley's liquidity program is managed by the Treasury Department and routinely monitored by the Asset and Liability Management Committee and two board committees. Among other actions, the Treasury Department actively monitors Valley's current liquidity profile, sources and stability of funding, availability of assets for pledging or sale, opportunities to gather additional funds, and anticipated future funding needs, including the level of unfunded commitments.

The Bank adheres to certain internal liquidity measures including ratios of loans to deposits below 110 percent and wholesale funding to total funding below 25 percent, as summarized in the table below. Management maintains flexibility to temporarily exceed these thresholds in certain operating environments.

The following table presents Valley's loan to deposits and wholesale funding to total funding ratios at March 31, 2024 and December 31, 2023:

|  | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Loans to deposits | 101.7% | 102.0% |
| Wholesale funding to total funding | 19.8 | 19.5 |

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

On the asset side of the balance sheet, the Bank has numerous sources of liquid funds in the form of cash and due from banks, interest bearing deposits with banks (including the FRB of New York) and other sources.

The following table summarizes Valley's sources of liquid assets:

*(in thousands)*

|  | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Cash and due from banks | $398,827 | $284,090 |
| Interest bearing deposits with banks | 542,006 | 607,135 |
| Trading debt securities | 3,989 | 3,973 |
| Held to maturity debt securities (1) | 197,136 | 194,094 |
| Available for sale debt securities (2) | 1,449,334 | 1,296,576 |
| Loans held for sale | 61,782 | 30,640 |
| Total liquid assets | $2,653,074 | $2,416,508 |

(1) Represents securities that are maturing within 90 days or would otherwise qualify as maturities if sold (i.e., 85 percent of original cost basis has been repaid) within the held to maturity debt security portfolio.

(2) Includes approximately $1.1 billion and $840.3 million of various investment securities that were pledged to counterparties to support our earning asset funding strategies at March 31, 2024 and December 31, 2023, respectively.

Total liquid assets represented 4.8 percent and 4.3 percent of interest earning assets at March 31, 2024 and December 31, 2023, respectively.

Other sources of funds on the asset side are derived from scheduled loan payments of principal and interest, as well as prepayments received. At March 31, 2024, estimated cash inflows from total loans are projected to be approximately $13.5 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 $371.0 million in principal payments from securities in the total investment portfolio at March 31, 2024 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, fully FDIC-insured indirect customer deposits, collateralized municipal deposits, and short-term and long-term borrowings. Our core deposit base, which generally excludes all fully insured indirect customer deposits, as well as retail certificates of deposit over $250 thousand, represents the largest of these sources. Average core deposits totaled approximately $40.6 billion and $37.6 billion for the three months ended March 31, 2024 and for the year ended December 31, 2023, respectively, representing 71.7 percent and 66.6 percent of average interest earning assets for the respective periods. The level of interest bearing deposits is affected by interest rates offered, which is often influenced by our need for funds, rates prevailing in the capital markets, competition, and the need to manage interest rate risk sensitivity.

In addition to customer deposits, the Bank has access to readily available borrowing sources to supplement its current and projected funding needs. The following table presents short-term borrowings outstanding at March 31, 2024 and December 31, 2023:

*(in thousands)*

|  | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| FHLB advances | $— | $850,000 |
| Securities sold under agreements to repurchase | 75,224 | 67,834 |
| Total short-term borrowings | $75,224 | $917,834 |

67

The following table summarizes the Bank's estimated unused available non-deposit borrowing capacities at March 31, 2024 and December 31, 2023:

*(in thousands)*

|  | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| FHLB borrowing capacity\* | $12,741,356 | $13,604,000 |
| Unused FRB discount window\* | 8,788,000 | 8,530,000 |
| Unused federal funds lines available from commercial banks | 2,140,000 | 2,140,000 |
| Unencumbered investment securities | 812,825 | 1,129,000 |
| Total | $24,482,181 | $25,403,000 |

\* Used and unused FHLB and FRB borrowings are collateralized by certain pledged securities, including but not limited to U.S. government and agency mortgage-backed securities and blanket qualifying first lien on certain real estate and residential mortgage secured loans.

### Corporation Liquidity

Valley’s recurring cash requirements primarily consist of dividends to preferred and common shareholders and interest expense on subordinated notes and junior subordinated debentures issued to capital trusts. As part of our ongoing asset/liability management strategies, Valley could also use cash to repurchase shares of its outstanding common stock under its share repurchase program or redeem its callable junior subordinated debentures and subordinated notes. Valley's cash needs are routinely satisfied by dividends collected from the Bank. Projected cash flows from the Bank are expected to be adequate to pay preferred and common dividends, if declared, and interest expense payable to subordinated note holders and capital trusts, given the current capital levels and current profitable operations of the Bank. In addition to dividends received from the Bank, Valley can satisfy its cash requirements by utilizing its own cash and potential new funds borrowed from outside sources or capital issuances. Valley also has the right to defer interest payments on the junior subordinated debentures, and therefore distributions on its trust preferred securities for consecutive quarterly periods of up to five years, but not beyond the stated maturity dates, and subject to other conditions.

### Investment Securities Portfolio

As of March 31, 2024, we had $67.0 million, $1.4 billion, and $3.7 billion in equity, AFS debt and HTM debt securities, respectively. We also had $4.0 million of trading securities consisting of U.S. Treasury securities at March 31, 2024. The AFS and HTM debt securities portfolios, which comprise the majority of the securities we own, include: U.S. Treasury securities, U.S. government agency securities, tax-exempt and taxable issuances of states and political subdivisions, residential mortgage-backed securities, single-issuer trust preferred securities principally issued by bank holding companies and high quality corporate bonds. Among other securities, our AFS debt securities include securities such as bank issued and other corporate bonds, as well as municipal special revenue bonds, which may pose a higher risk of future impairment charges to us as a result of the uncertain economic environment and its potential negative effect on the future performance of the security issuers. The equity securities consist of two publicly traded mutual funds, CRA investments and several other equity investments we have made in companies that develop new financial technologies and in partnerships that invest in such companies. Our CRA and other equity investments are a mix of both publicly traded entities and privately held entities.

The primary purpose of the HTM and AFS debt securities portfolios is to provide a source of earnings and liquidity, as well as serve as a tool for managing interest rate risk. The decision to purchase or sell securities is based upon the current assessment of long and short-term economic and financial conditions, including the interest rate environment and other components of statement of financial condition. See additional information under “Interest Rate Sensitivity,” “Liquidity and Cash Requirements” and “Capital Adequacy” sections elsewhere in this MD&A.

We continually evaluate our investment securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability, and the level of interest rate risk to which we are exposed. These evaluations may cause us to change the level of funds we deploy into investment securities, change the composition of our investment securities portfolio, and change the proportion of investments primarily made into the AFS and HTM debt securities portfolios.

### Allowance for Credit Losses and Impairment Analysis

**Available for sale debt securities.** AFS debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. In assessing whether a credit loss exists, we compare the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value is less than the amortized cost basis. Declines in fair value that have not been recorded through an allowance for credit losses, such as declines due to changes in market interest rates, are recorded through other comprehensive income, net of applicable taxes.

We have evaluated all AFS debt securities that are in an unrealized loss position as of March 31, 2024 and December 31, 2023 and determined that the declines in fair value were mainly attributable to changes in market volatility, due to factors such as interest rates and spread factors, but not attributable to credit quality or other factors. During the first quarter 2023, Valley recognized a credit related impairment of one corporate bond issued by Signature Bank resulting in both a provision for credit losses and full charge-off of the security totaling $5.0 million based on a comparison of the present value of expected cash flows to the amortized cost. The bond was subsequently sold and the sale resulted in a $869 thousand gain during the fourth quarter 2023. There was no other impairment recognized within the AFS debt securities portfolio during the three months ended March 31, 2024 and March 31, 2023.

Valley does not intend to sell any of its AFS debt securities in an unrealized loss position prior to recovery of our amortized cost basis, and it is more likely than not that Valley will not be required to sell any of its securities prior to recovery of our amortized cost basis. None of the AFS debt securities were past due as of March 31, 2024 and there was no allowance for credit losses for AFS debt securities at March 31, 2024 and December 31, 2023.

**Held to maturity debt securities.** Valley estimates the expected credit losses on HTM debt securities that have loss expectations using a discounted cash flow model developed by a third party. Valley has a zero-loss expectation for certain securities within the HTM portfolio, including U.S. Treasury securities, U.S. agency securities, residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, and collateralized municipal bonds. To measure the expected credit losses on HTM debt securities that have loss expectations, 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. HTM debt securities were carried net of an allowance for credit losses totaling approximately $1.1 million and $1.2 million at March 31, 2024 and December 31, 2023, respectively.

**Investment grades.** The investment grades in the table below reflect the most current independent analysis performed by third parties of each security as of the date presented and not necessarily the investment grades at the date of our purchase of the securities. For many securities, the rating agencies may not have performed an independent analysis of the tranches owned by us, but rather an analysis of the entire investment pool. For this and other reasons, we believe the assigned investment grades may not accurately reflect the actual credit quality of each security and should not be viewed in isolation as a measure of the quality of our investment portfolio.

The following table presents the available for sale and held to maturity debt investment securities portfolios by investment grades at March 31, 2024:

*(in thousands)*

| Available for sale investment grades: | March 31, 2024 Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value |
| --- | ---: | ---: | ---: | ---: |
| AAA/AA/A Rated | $1,413,316 | $607 | $(154,132) | $1,259,791 |
| BBB Rated | 96,483 | — | (5,234) | 91,249 |
| Not rated | 111,889 | — | (13,595) | 98,294 |
| Total | $1,621,688 | $607 | $(172,961) | $1,449,334 |
| **Held to maturity investment grades:** |  |  |  |  |
| AAA/AA/A Rated | $3,532,999 | $3,439 | $(483,696) | $3,052,742 |
| BBB Rated | 6,000 | — | (468) | 5,532 |
| Non-investment grade | 5,269 | — | (691) | 4,578 |
| Not rated | 167,550 | — | (13,000) | 154,550 |
| Total | $3,711,818 | $3,439 | $(497,855) | $3,217,402 |
| Allowance for credit losses | 1,131 | — | — | 1,131 |
| Total, net of allowance for credit losses | $3,710,687 | $3,439 | $(497,855) | $3,216,271 |

The unrealized losses in the AAA/AA/A rated categories of both the AFS and HTM debt securities portfolios (in the above table) were largely related to residential mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac and continued to be driven by the rising interest rate environment during the last 12-months. The investment securities AFS and HTM portfolio included $111.9 million and $167.6 million, respectively, of investments not rated by the rating agencies with aggregate unrealized losses of $13.6 million and $13.0 million, respectively, at March 31, 2024. The unrealized losses within non-rated AFS debt securities mostly related to several large corporate bonds negatively impacted by rising interest rates, and not changes in underlying credit. The unrealized losses within non-rated HTM debt securities mostly related to four single-issuer bank trust preferred issuances with a combined amortized cost of $36.1 million with $6.5 million gross unrealized losses and several corporate debt securities that were negatively impacted by rising interest rates, and not changes in their underlying credit.

See Note 6 to the consolidated financial statements for additional information regarding our investment securities portfolio.

### Loan Portfolio

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

*($ in thousands)*

| Loans | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Commercial and industrial | $9,104,193 | $9,230,543 |
| Commercial real estate: |  |  |
| Non-owner occupied | 14,962,851 | 15,078,464 |
| Multifamily (1) | 8,818,263 | 8,860,219 |
| Owner occupied | 4,367,839 | 4,304,556 |
| Total | 28,148,953 | 28,243,239 |
| Construction | 3,556,511 | 3,726,808 |
| Total commercial real estate | 31,705,464 | 31,970,047 |
| Residential mortgage | 5,618,355 | 5,569,010 |
| Consumer: |  |  |
| Home equity | 564,083 | 559,152 |
| Automobile | 1,700,508 | 1,620,389 |
| Other consumer | 1,229,439 | 1,261,154 |
| Total consumer loans | 3,494,030 | 3,440,695 |
| Total loans (2) | $49,922,042 | $50,210,295 |
| As a percent of total loans: |  |  |
| Commercial and industrial | 18.2% | 18.4% |
| Non-owner occupied | 30.0 | 30.0 |
| Multifamily | 17.7 | 17.7 |
| Owner occupied | 8.7 | 8.6 |
| Construction | 7.1 | 7.4 |
| Total Commercial real estate | 63.5 | 63.7 |
| Residential mortgage | 11.3 | 11.1 |
| Consumer loans | 7.0 | 6.8 |
| Total | 100.0% | 100.0% |

(1) Includes loans collateralized by properties that are greater than 50 percent rent regulated totaling approximately $531 million and $545 million at March 31, 2024 and December 31, 2023, respectively.

(2) Includes net unearned discount and deferred loan fees of $71.8 million and $85.4 million at March 31, 2024 and December 31, 2023, respectively.

Total loans decreased $288.3 million, or 2.3 percent on an annualized basis, to $49.9 billion at March 31, 2024 from December 31, 2023 largely as a result of the sale of $196.5 million of commercial real estate and construction loans at par value to Bank Leumi Le-Israel B.M. (BLITA) and the sale of $93.6 million of commercial and industrial loans associated with the sale of our premium finance lending division during the first quarter 2024. During the three months ended March 31, 2024, we also transferred $34.1 million of construction loans to loans held for sale at March 31, 2024 and subsequently sold the loans at par value to BLITA in April 2024. Loans held for sale are presented separately from total loans on the consolidated statements of financial condition totaled $61.8 million and $30.6 million at March 31, 2024 and December 31, 2023, respectively.

Commercial and industrial loans decreased $126.4 million to $9.1 billion at March 31, 2024 from December 31, 2023 mostly due to the sale of the $93.6 million of loans associated with the sale of our premium finance lending division in February 2024 and the contractual run-off of premium finance loans that were retained and not sold. Our retained commercial premium finance portfolio totaled $145.7 million at March 31, 2024 and is expected to mostly run-off at their scheduled maturity dates over the next 12 months.

Commercial real estate loans (excluding construction loans) decreased $94.3 million to $28.1 billion at March 31, 2024 from December 31, 2023 largely due to the sale of $151.0 million through loan participation agreements with BLITA during March 2024. We continue to be selective in the organic loan originations mainly to existing and other well-established clients within our markets of Florida, New Jersey, New York and Manhattan. The commercial real estate loan portfolio had a combined weighted average loan to value ratio of 58 percent and debt service coverage ratio of 1.63 at March 31, 2024. Commercial real estate collateralized by office buildings totaled approximately $3.3 billion at March 31, 2024 and remained relatively unchanged as compared to December 31, 2023. Our loans collateralized by office buildings had a combined weighted average loan to value rate of 53 percent and debt service coverage ratio of 1.68 at March 31, 2024.

Construction loans decreased $170.3 million to $3.6 billion at March 31, 2024 from December 31, 2023 partly due to the sale of $45.6 million of loan participations with BLITA in March 2024, and the transfer of $34.1 million of loans to loans held for sale as of March 31, 2024. The remaining net decrease largely relates to the migration of completed projects to both internal and external permanent financing and a low level of new advances on existing projects.

Residential mortgage loans totaled $5.6 billion at March 31, 2024 and increased $49.3 million from December 31, 2023 primarily due to the continued retention of a high percentage of new loan volumes for investment rather than for sale, combined with lower prepayment activity during the first quarter 2024. New and refinanced residential mortgage loan originations totaled $115.0 million for the first quarter 2024 as compared to $117.3 million and $194.4 million for the fourth quarter 2023 and first quarter 2023, respectively. During the first quarter 2024, we retained approximately 67.3 percent of the total residential mortgage originations in our held for investment loan portfolio. The volume of primarily new home loan applications remained relatively low in the early stages of the second quarter 2024 largely due to the higher level of mortgage interest rates and this may continue to challenge our ability to grow this loan category.

Home equity loans increased by only $4.9 million to $564.1 million at March 31, 2024 compared to December 31, 2023 as new home equity loan originations remained challenged due to the unfavorable high interest rate environment.

Automobile loans increased by $80.1 million, or 19.8 percent on an annualized basis, to $1.7 billion at March 31, 2024 as compared to December 31, 2023 mainly due to a slight uptick in application volume and slower repayments as compared to the fourth quarter 2023.

Other consumer loans decreased $31.7 million to $1.2 billion at March 31, 2024 as compared to December 31, 2023 as demand and utilization of collateralized personal lines of credit slowed during the first quarter 2024.

A 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.

Looking forward to second quarter 2024 and beyond, we expect to remain highly selective on new loan originations and generally supportive of compelling projects led by our high quality and tenured customer base. We will continue to focus our new origination efforts on traditional commercial and industrial, owner-occupied real estate and healthcare. For the full year ended December 31, 2024, we currently expect total loan growth in the range of zero to four percent as compared to total loans of $50.2 billion at December 31, 2023.

### Non-performing Assets

NPAs include non-accrual loans, OREO, and other repossessed assets (which primarily consist of automobiles and taxi medallions) at March 31, 2024. 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 lower of cost or fair value, less estimated cost to sell.

Our NPAs decreased $4.6 million to $288.8 million at March 31, 2024 as compared to December 31, 2023 mainly due to lower non-accrual construction loan balances. NPAs as a percentage of total loans and NPAs totaled 0.58 percent at both March 31, 2024 and December 31, 2023 (as shown in the table below). We believe our total NPAs has remained 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 7 to the consolidated financial statements.

Our lending strategy is based on underwriting standards designed to maintain high credit quality, and we remain optimistic regarding the overall future performance of our loan portfolio. During the three months ended March 31, 2024, most of our credit trends have remained relatively stable, and the majority of our borrowers continued to demonstrate resilience despite the impact of higher borrowing costs, elevated inflation, labor costs and other factors. We continue to proactively monitor our commercial loans for potential negative trends/borrower weakness due to the current operating environment and internally risk rate them accordingly. However, management cannot provide assurance that the non-performing assets will not materially increase from the levels reported at March 31, 2024 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:

*($ in thousands)*

| Accruing past due loans: 30 to 59 days past due: | March 31, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Commercial and industrial | $6,202 | $9,307 |
| Commercial real estate | 5,791 | 3,008 |
| Residential mortgage | 20,819 | 26,345 |
| Total consumer | 14,032 | 20,554 |
| Total 30 to 59 days past due | 46,844 | 59,214 |
| 60 to 89 days past due: |  |  |
| Commercial and industrial | 2,665 | 5,095 |
| Commercial real estate | 3,720 | 1,257 |
| Residential mortgage | 5,970 | 8,200 |
| Total consumer | 1,834 | 4,715 |
| Total 60 to 89 days past due | 14,189 | 19,267 |
| 90 or more days past due: |  |  |
| Commercial and industrial | 5,750 | 5,579 |
| Construction | 3,990 | 3,990 |
| Residential mortgage | 2,884 | 2,488 |
| Total consumer | 731 | 1,088 |
| Total 90 or more days past due | 13,355 | 13,145 |
| Total accruing past due loans | $74,388 | $91,626 |
| **Non-accrual loans:** |  |  |
| Commercial and industrial | $102,399 | $99,912 |
| Commercial real estate | 100,052 | 99,739 |
| Construction | 51,842 | 60,851 |
| Residential mortgage | 28,561 | 26,986 |
| Total consumer | 4,438 | 4,383 |
| Total non-accrual loans | 287,292 | 291,871 |
| Other real estate owned (OREO) | 88 | 71 |
| Other repossessed assets | 1,393 | 1,444 |
| Total non-performing assets (NPAs) | $288,773 | $293,386 |
| Total non-accrual loans as a % of loans | 0.58% | 0.58% |
| Total NPAs as a % of loans and NPAs | 0.58 | 0.58 |
| Total accruing past due and non-accrual loans as a % of loans | 0.72 | 0.76 |
| Allowance for loan losses as a % of non-accrual loans | 163.33 | 152.83 |

Loans past due 30 to 59 days decreased $12.4 million to $46.8 million at March 31, 2024 as compared to December 31, 2023 due to declines in all loan categories, except for commercial real estate which was largely comprised of two loans in this early stage delinquency category.

Loans past due 60 to 89 days decreased $5.1 million to $14.2 million at March 31, 2024 as compared to December 31, 2023 largely due to lower delinquencies across the non-commercial real estate loan categories.

Loans 90 days or more past due and still accruing interest increased $210 thousand to $13.4 million at March 31, 2024 as compared to December 31, 2023. All the loans past due 90 days or more and still accruing interest are well-secured and in the process of collection.

Non-accrual loans decreased $4.6 million to $287.3 million at March 31, 2024 as compared to $291.9 million at December 31, 2023 mainly due to lower non-accrual construction loan balances. Non-accrual construction loans decreased $9.0 million to $51.8 million at March 31, 2024 as compared to December 31, 2023 largely due to the partial loan charge-offs related to two loan relationships during the first quarter 2024. Non-accrual commercial and industrial loans increased $2.5 million to $102.4 million at March 31, 2024 as compared to December 31, 2023 mainly due to one new non-performing loan relationship totaling $13.3 million, which was largely offset by $9.5 million of partial loan charge-offs related to one taxi medallion loan relationship during the first quarter 2024.

Non-performing taxi medallion loans included in non-accrual commercial and industrial loans totaled $53.0 million at March 31, 2024 and had related reserves of $28.2 million, or 53.3 percent of such loans, within the allowance for loan losses as compared to $62.3 million of loans with related reserves of $37.7 million at December 31, 2023. Potential further declines in the market valuation of taxi medallions and the current operating environment mainly within New York City may negatively impact the performance of this portfolio.

Although the timing of collection is uncertain, management believes that the majority of the non-accrual loans at March 31, 2024, 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.

### Allowance for Credit Losses for Loans

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

Valley estimates the collective ACL using a current expected credit losses methodology which is based on relevant information about historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the loan balances. In estimating the component of the allowance on a collective basis, we use a transition matrix model which calculates an expected life of loan loss percentage for each loan pool by 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 are governed by a cross-functional committee. The committee meets each quarter to determine which economic scenarios developed by Moody's will be incorporated into the model, as well as the relative probability weightings of the selected scenarios, based upon all readily available information. The model projects economic variables under each scenario based on detailed statistical analyses. We have identified and selected key variables that most closely correlated to our historical credit performance, which include: GDP, unemployment and the Case-Shiller Home Price Index.

At March 31, 2024, Valley maintained the majority of its probability weighting used in the economic forecast to the Moody’s Baseline scenario with less emphasis on the S-3 downside and S-1 upside scenarios. The probability weightings were unchanged from December 31, 2023. At March 31, 2024, the standalone Moody's Baseline scenario, reflected a more optimistic outlook as compared at December 31, 2023 in terms of most metrics highlighted below.

At March 31, 2024, the Moody's Baseline forecast included the following specific assumptions:

- GDP expansion of approximately 1.5 percent in the second quarter 2024;
- Unemployment of 4.0 percent in the second quarter 2024 approximately 4.0 to 4.1 percent over the remainder of the forecast period ending in the first quarter 2026;
- Inflation rate at 3.2 percent in February 2024; and
- The Federal Reserve continuing to pause with the federal funds rate at 5.25 - 5.50 percent and possible cuts totaling 0.75 percent in 2024.

See more details regarding our allowance for credit losses for loans in Note 7 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:

*($ in thousands)*

| Allowance for credit losses for loans | Three Months Ended March 31, 2024 | December 31, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: |
| Beginning balance | $465,550 | $462,345 | $483,255 |
| Impact of the adoption of ASU No. 2022-02 (1) | — | — | (1,368) |
| Beginning balance, adjusted | 465,550 | 462,345 | 481,887 |
| Loans charged-off: |  |  |  |
| Commercial and industrial | (14,293) | (10,616) | (26,047) |
| Commercial real estate | (1,204) | (8,814) | — |
| Construction | (7,594) | (1,906) | (5,698) |
| Residential mortgage | — | (25) | — |
| Total consumer | (1,809) | (1,274) | (828) |
| Total loans charged-off | (24,900) | (22,635) | (32,573) |
| Charged-off loans recovered: |  |  |  |
| Commercial and industrial | 682 | 4,655 | 1,399 |
| Commercial real estate | 241 | 1 | 24 |
| Residential mortgage | 25 | 15 | 21 |
| Total consumer | 397 | 473 | 761 |
| Total loans recovered | 1,345 | 5,144 | 2,205 |
| Total net loan charge-offs | (23,555) | (17,491) | (30,368) |
| Provision charged for credit losses | 45,274 | 20,696 | 9,450 |
| Ending balance | $487,269 | $465,550 | $460,969 |
| **Components of allowance for credit losses for loans:** |  |  |  |
| Allowance for loan losses | $469,248 | $446,080 | $436,898 |
| Allowance for unfunded credit commitments | 18,021 | 19,470 | 24,071 |
| Allowance for credit losses for loans | $487,269 | $465,550 | $460,969 |
| **Components of provision for credit losses for loans:** |  |  |  |
| Provision for credit losses for loans | $46,723 | $21,396 | $9,979 |
| Credit for unfunded credit commitments | (1,449) | (700) | (529) |
| Total provision for credit losses for loans | $45,274 | $20,696 | $9,450 |
| Allowance for credit losses for loans as a % of total loans | 0.98% | 0.93% | 0.95% |

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

The following table presents the relationship among net loans charged-off and recoveries, and average loan balances outstanding for the periods indicated:

*($ in thousands)*

| Net loan (charge-offs) recoveries | Three Months Ended March 31, 2024 | December 31, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: |
| Commercial and industrial | $(13,611) | $(5,961) | $(24,648) |
| Commercial real estate | (963) | (8,813) | 24 |
| Construction | (7,594) | (1,906) | (5,698) |
| Residential mortgage | 25 | (10) | 21 |
| Total consumer | (1,412) | (801) | (67) |
| Total | $(23,555) | $(17,491) | $(30,368) |
| Average loans outstanding |  |  |  |
| Commercial and industrial | $9,235,707 | $9,028,082 | $8,754,853 |
| Commercial real estate | 28,259,701 | 28,182,607 | 26,555,421 |
| Construction | 3,693,343 | 3,878,601 | 3,780,615 |
| Residential mortgage | 5,600,135 | 5,585,976 | 5,363,421 |
| Total consumer | 3,457,705 | 3,364,163 | 3,405,061 |
| Total | $50,246,591 | $50,039,429 | $47,859,371 |
| Annualized net loan charge-offs to average loans outstanding |  |  |  |
| Commercial and industrial | 0.59% | 0.26% | 1.13% |
| Commercial real estate | 0.01 | 0.13 | 0.00 |
| Construction | 0.82 | 0.20 | 0.60 |
| Residential mortgage | 0.00 | 0.00 | 0.00 |
| Total consumer | 0.16 | 0.10 | 0.01 |
| Total annualized net loan charge-offs to total average loans outstanding | 0.19 | 0.14 | 0.25 |

Net loan charge-offs totaled $23.6 million for the first quarter 2024 as compared to $17.5 million and $30.4 million for the fourth quarter 2023 and first quarter 2023, respectively. Gross commercial and industrial loan charge-offs totaled $14.3 million for the first quarter 2024 and included (i) partial charge-offs totaling $9.5 million related to one non-performing taxi medallion loan relationship that was fully reserved for in our allowance for loan losses at December 31, 2023 and (ii) a $3.5 million of partial loan charge-offs related to one non-performing loan relationship (with allowance reserves totaling $3.3 million at December 31, 2023). Gross construction loan charge-offs totaled $7.6 million for the first quarter 2024 and related to partial charge-offs of two construction loan relationships. The two construction loan relationships had total allowance reserves of $3.2 million at December 31, 2023 prior to the first quarter 2024 partial charge-offs.

The amount of net loan charge-offs (as presented in the above table) and the low level of individual loan charge-offs for the first quarter 2024 continued to trend within management's expectations for the credit quality of the loan portfolio at March 31, 2024.

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:

*($ in thousands)*

| Loan Category: | March 31, 2024 Allowance Allocation | Allocation as a % of Loan Category | December 31, 2023 Allowance Allocation | Allocation as a % of Loan Category | March 31, 2023 Allowance Allocation | Allocation as a % of Loan Category |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial and industrial loans | $138,593 | 1.52% | $133,359 | 1.44% | $127,992 | 1.42% |
| Commercial real estate loans: |  |  |  |  |  |  |
| Commercial real estate | 209,355 | 0.74 | 194,820 | 0.69 | 190,420 | 0.70 |
| Construction | 56,492 | 1.59 | 54,778 | 1.47 | 52,912 | 1.42 |
| Total commercial real estate loans | 265,847 | 0.84 | 249,598 | 0.78 | 243,332 | 0.79 |
| Residential mortgage loans | 44,377 | 0.79 | 42,957 | 0.77 | 41,708 | 0.76 |
| Consumer loans: |  |  |  |  |  |  |
| Home equity | 2,809 | 0.50 | 3,429 | 0.61 | 4,417 | 0.86 |
| Auto and other consumer | 17,622 | 0.60 | 16,737 | 0.58 | 19,449 | 0.69 |
| Total consumer loans | 20,431 | 0.58 | 20,166 | 0.59 | 23,866 | 0.71 |
| Allowance for loan losses | 469,248 | 0.94 | 446,080 | 0.89 | 436,898 | 0.90 |
| Allowance for unfunded credit commitments | 18,021 |  | 19,470 |  | 24,071 |  |
| Total allowance for credit losses for loans | $487,269 |  | $465,550 |  | $460,969 |  |
| Allowance for credit losses for loans as a % total loans |  | 0.98% |  | 0.93% |  | 0.95% |

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 0.98 percent at March 31, 2024 as compared to 0.93 percent and 0.95 percent at December 31, 2023 and March 31, 2023, respectively. During the first quarter 2024, the provision for credit losses for loans totaled $45.3 million as compared to $20.7 million and $9.5 million for the fourth quarter 2023 and first quarter 2023, respectively. The increased provision for credit losses for the first quarter 2024 was mainly driven by higher quantitative reserves related to criticized and classified loans within the commercial real estate, commercial and industrial, and construction loan portfolios. This increase was partially offset by lower economic forecast and other qualitative reserves at March 31, 2024 and a credit (i.e., negative provision) for unfunded credit commitments.

Our provision for credit losses could remain elevated during the remainder of 2024 due to several factors, including, but not limited to the impact of future changes in (1) our economic outlook (2) the overall performance of our loan portfolio and (3) the composition of our loan portfolio.

### Capital Adequacy

A significant measure of the strength of a financial institution is its shareholders’ equity. At both March 31, 2024 and December 31, 2023, shareholders' equity totaled approximately $6.7 billion, or 11.0 percent of total assets.

During the three months ended March 31, 2024, total shareholders’ equity increased by approximately $25.7 million primarily due to the following:

- net income of $96.3 million, and
- a $773 thousand increase attributable to the effect of our stock incentive plan, partially offset by
- cash dividends declared on common and preferred stock totaling a combined $60.9 million, and
- other comprehensive loss of $10.4 million.

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

Valley is required to maintain a common equity Tier 1 capital to risk-weighted assets ratio of 4.5 percent, Tier 1 capital to risk-weighted assets ratio of 6.0 percent, ratio of total capital to risk-weighted assets of 8.0 percent, and a minimum leverage ratio of 4.0 percent, plus a 2.5 percent capital conservation buffer added to the minimum requirements for capital adequacy purposes. As of March 31, 2024 and December 31, 2023, 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 rule as of August 26, 2020, we deferred 100 percent of the CECL Day 1 impact to shareholders' equity plus 25 percent of the reserve build (i.e., provision for credit losses less net charge-offs) for a two-year period ending January 1, 2022. On January 1, 2022, the deferral amount totaling $47.3 million after-tax started to be phased-in by 25 percent and will increase 25 percent per year until fully phased-in on January 1, 2025. As of March 31, 2024, approximately $35.5 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 9 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 March 31, 2024 and December 31, 2023:

*($ in thousands)*

| As of March 31, 2024 Total Risk-based Capital | Actual Amount | Ratio | Minimum Capital Requirements Amount | Ratio | To Be Well Capitalized Under Prompt Corrective Action Provision Amount | Ratio |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Valley | $5,913,519 | 11.88% | $5,228,135 | 10.50% | N/A | N/A |
| Valley National Bank | 5,844,047 | 11.74 | 5,226,143 | 10.50 | $4,977,279 | 10.00% |
| Common Equity Tier 1 Capital |  |  |  |  |  |  |
| Valley | 4,652,816 | 9.34 | 3,485,424 | 7.00 | N/A | N/A |
| Valley National Bank | 5,442,185 | 10.93 | 3,484,095 | 7.00 | 3,235,231 | 6.50 |
| Tier 1 Risk-based Capital |  |  |  |  |  |  |
| Valley | 4,867,657 | 9.78 | 4,232,300 | 8.50 | N/A | N/A |
| Valley National Bank | 5,442,185 | 10.93 | 4,230,687 | 8.50 | 3,981,823 | 8.00 |
| Tier 1 Leverage Capital |  |  |  |  |  |  |
| Valley | 4,867,657 | 8.20 | 2,375,838 | 4.00 | N/A | N/A |
| Valley National Bank | 5,442,185 | 9.16 | 2,376,208 | 4.00 | 2,970,261 | 5.00 |
| **As of December 31, 2023** |  |  |  |  |  |  |
| Total Risk-based Capital |  |  |  |  |  |  |
| Valley | $5,855,633 | 11.76% | $5,228,447 | 10.50% | N/A | N/A |
| Valley National Bank | 5,794,213 | 11.64 | 5,228,403 | 10.50 | $4,979,431 | 10.00% |
| Common Equity Tier 1 Capital |  |  |  |  |  |  |
| Valley | 4,623,473 | 9.29 | 3,485,631 | 7.00 | N/A | N/A |
| Valley National Bank | 5,420,894 | 10.89 | 3,485,602 | 7.00 | 3,236,630 | 6.50 |
| Tier 1 Risk-based Capital |  |  |  |  |  |  |
| Valley | 4,838,314 | 9.72 | 4,232,552 | 8.50 | N/A | N/A |
| Valley National Bank | 5,420,894 | 10.89 | 4,232,517 | 8.50 | 3,983,545 | 8.00 |
| Tier 1 Leverage Capital |  |  |  |  |  |  |
| Valley | 4,838,314 | 8.16 | 2,372,129 | 4.00 | N/A | N/A |
| Valley National Bank | 5,420,894 | 9.14 | 2,372,322 | 4.00 | 2,965,403 | 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 38.9 percent for the three months ended March 31, 2024 as compared to 53.7 percent for the year ended December 31, 2023.

Cash dividends declared amounted to $0.11 per common share for each of the three months ended March 31, 2024 and 2023. 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 in the MD&A section “Liquidity and Cash Requirements” and Notes 12 and 13 to the consolidated financial statements included in this report.

## Market risk

As filed, 257 characters.

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 64 for a discussion of interest rate risk.

## Controls and procedures

As filed, 3,161 characters.

(a) Disclosure control and procedures. Valley maintains disclosure controls and procedures which, consistent with Rule 13a-15(e) under the 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 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 March 31, 2024 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 control 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.

## Risk factors

As filed, 159 characters.

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.

Filed May 8, 2024.
Source: SEC EDGAR, the filing index for accession 0000714310-24-000084. Last ingested by Listed: Nov 5, 2026, 17:26 ET. No prices; not investment advice.